12 February 2017
Results for the 12 months ended
31 December 2017 (Unaudited)
Based on IFRS and expressed in US
Dollars (US$)
Acacia Mining plc (“Acacia’’) reports
full year 2017 results
“We delivered resilient operational performance during a
challenging 2017, with full year gold production of 767,883 ounces
at all-in sustaining costs (“AISC”) of US$875 per ounce”, said Peter Geleta, Interim CEO of Acacia. “Whilst
we were impacted by events beyond our control, we took decisive
action to stabilise our business and believe our operations are now
well placed to deliver in 2018. The challenges in our operating
environment led to our production guidance being revised during
2017, whilst the ongoing ban on the export of gold/copper
concentrate meant that we were unable to export and sell 185,800
ounces of produced gold which led to a substantial cash outflow. As
expected, we will see a step-down in production in 2018 to
435,000-475,000 ounces as Buzwagi transitions to processing
stockpiles and Bulyanhulu, whilst in reduced operations, solely
re-processes tailings. Our continued cost discipline means that
AISC will remain competitive at US$935-985 per ounce. Our focus remains on
delivering optimal performance from all aspects of the business
within our control in the current operating environment, returning
the business to free cash generation and delivering value for all
of our stakeholders. We are supporting efforts towards achieving a
negotiated resolution with the Tanzanian Government.”
Operational Highlights
- Total Recordable Injury Frequency Rate (TRIFR) of 0.45, 39%
lower than 2016
- 2017 gold production of 767,883 ounces, 7% lower than 2016 as a
result of lower production at Bulyanhulu primarily due to the
transition to reduced operations in Q4 2017
- Gold sales of 592,861 ounces, 22% lower than production,
comprised 19,720 ounces of gold in concentrate, 10% of total
concentrate production due to the concentrate export ban imposed in
March 2017 and 573,141 ounces of gold
in doré, in line with doré production
- 2017 AISC1 of US$875
per ounce sold, below full year guidance range and our lowest ever
achieved
- Successful drilling programme at North Mara has more than
doubled the Mineral Reserve at the Gokona Underground to
1.3Moz
- New management leading stabilisation of company and post
year-end appointed a senior Tanzanian to lead Tanzanian
business
Financial Highlights
- Financial performance was significantly impacted by a post-tax
non-cash impairment charge of US$644
million resulting from uncertainty in the operating
environment and the ban on exporting concentrate, resulting in
US$264 million of lost revenue in the
year
- Revenue of US$752 million, 29%
lower than 2016, with Adjusted EBITDA1 of US$311 million, 24% down from 2016
- Net loss of US$707 million
includes a post-tax impairment charge of US$644 million, equating to a loss of US173 cents
per share
- Adjusted net earnings of US$146
million and Adjusted EPS of US35.7 cents were 9% below
2016
- Cash balance fell from US$318
million to US$81 million at
year-end, due to lost revenue resulting from the concentrate ban
and a gross build-up of VAT receivables of US$91 million, but was boosted post year-end by
the sale of a non-core royalty for US$45
million
- Entered into option agreements to provide a floor price of at
least US$1,300 per ounce for majority
of H1 2018 production
- Contributed US$143 million of
taxes and royalties to Tanzania
and implemented projects benefiting over 60,000 Tanzanians in
2017
|
Three months ended 31 December |
Year ended 31 December |
(Unaudited) |
2017 |
2016 |
2017 |
2016 |
Gold
production (ounces) |
148,477 |
212,954 |
767,883 |
829,705 |
Gold
sold (ounces) |
147,636 |
209,292 |
592,861 |
816,743 |
Cash
cost (US$/ounce)1 |
581 |
679 |
587 |
640 |
AISC
(US$/ounce)1 |
779 |
952 |
875 |
958 |
Net
average realised gold price (US$/ounce)1 |
1,296 |
1,211 |
1,260 |
1,240 |
(in
US$'000) |
|
|
|
|
Revenue |
189,249 |
263,890 |
751,515 |
1,053,532 |
EBITDA
1 |
45,463 |
105,681 |
257,180 |
415,388 |
Adjusted EBITDA1 |
67,613 |
103,010 |
310,527 |
409,903 |
Net
(loss)/earnings |
(785,975) |
48,285 |
(707,394) |
94,944 |
Basic
(loss)/earnings per share (EPS) (cents) |
(191.7) |
11.8 |
(172.5) |
23.2 |
Adjusted net (loss)/earnings1 |
45,799 |
46,415 |
146,218 |
161,021 |
Adjusted net (loss)/earnings per share (AEPS)
(cents)1 |
11.2 |
11.3 |
35.7 |
39.2 |
Cash
generated from operating activities |
(1,503) |
60,933 |
(22,972) |
317,976 |
Capital expenditure2 |
21,301 |
57,826 |
149,376 |
195,898 |
Cash
balance |
80,513 |
317,791 |
80,513 |
317,791 |
Total
borrowings |
71,000 |
99,400 |
71,000 |
99,400 |
1 These are non-IFRS measures. Refer to page
33 for definitions
2 Excludes non-cash capital adjustments
(reclamation asset adjustments) and include finance lease purchases
and land purchases recognised as long term prepayments
CEO Statement
The company recorded resilient performance in what became a
difficult operating environment in 2017 and expects to return the
business to free cash generation during the forthcoming year.
Whilst operational performance was solid, financial performance was
significantly impacted by Tanzania’s on-going ban on exporting
gold/copper concentrate which resulted in approximately
US$264 million of lost revenue in
2017 and drove a total cash outflow of US$237 million.
Whilst we have been impacted by events beyond our control, our
operations still continued to deliver during 2017. It was
especially pleasing to see a record year of production at Buzwagi
of 268,785 ounces in spite of the uncertainty about the mine’s
future as the mine effectively completed the final stage of the
open pit ahead of moving to a stockpile processing operation for
the next three years. North Mara continued to perform well and
delivered strong free cash flow despite production of 323,607
ounces being below 2016’s record year. Grades from the Gokona
Underground remained strong, albeit behind 2016’s bonanza grades,
as the focus of mining was in the lower grade West Zone. During the
year we completed the mining of the Nyabirama Stage 3 open pit and
continued to progress waste stripping at the start of the Stage 4
open pit which will provide the majority of the mill feed going
forward. At Bulyanhulu we made the difficult decision to move the
mine to reduced operations in September and temporarily cease
production from the underground mine and therefore gold/copper
concentrates, after significant cash outflows through the year.
This was the primary driver behind production of 175,491 ounces
being 39% behind 2016’s level.
On the cost side, we demonstrated further improvement in AISC as
strict cost discipline was maintained. Group AISC of US$875 per ounce sold was below the guidance
range and the lowest that Acacia has ever achieved. If Group sales
ounces had equalled production, AISC would have been approximately
US$798 per ounce sold. Buzwagi
benefitted from increased production rates which drove an AISC of
US$667 per ounce sold, which was 39%
lower than 2016, with inventory adjustments largely offsetting the
lack of sales of gold in concentrate. At North Mara we saw a small
increase in AISC to US$803 per ounce
sold primarily driven by the lower production base compared to the
previous year. At Bulyanhulu the impact of the lower sales and
production base led to AISC per ounce sold being 30% higher than
2016 at US$1,373 although this was
partly offset by lower capitalised development costs and lower
sustaining capital spend.
One of the key focus areas at Acacia over the last four years
has been on reducing the number of international employees and
contractors within our business and ensuring that our Tanzanian
assets are increasingly led and operated by Tanzanian employees.
Since 2013, we have driven a reduction in international employees
of approximately 85% within our business and now over 96% of our
people are Tanzanian. Since my appointment as Interim CEO, we have
continued this process and following the move to reduced operations
at Bulyanhulu and the transition of Buzwagi to stockpile processing
we have consolidated the management teams at the two mines, which
are located within the same region, into one, under the leadership
of an experienced Tanzanian national, Benedict Busunzu. We are
pleased to report the combined Bulyanhulu and Buzwagi management
team is now made up of five Tanzanian nationals and one
international employee. Post year end we also appointed Asa
Mwaipopo as our Managing Director, Tanzania. Asa is a highly experienced
Tanzanian mining engineer, who has worked in the industry and for
Acacia for a number of years in increasingly senior roles. In his
new role, he will head up our Tanzanian business by becoming the
Managing Director of each of our Tanzanian operating entities with
the mine general managers and functional heads in Tanzania reporting directly into him.
Discussions between the Government of Tanzania (“GoT”) and Barrick Gold Corporation
(“Barrick”), Acacia’s majority shareholder, aimed at resolving the
current situation remain on-going. In October 2017, the GoT and Barrick each announced
that the parties had agreed to a framework on a way forward, and
Barrick has indicated that they expect to be able to present a
detailed proposal for a possible solution to Acacia for review and
approval during the first half of 2018. We are providing support to
Barrick in its ongoing discussions, and any proposal that may be
agreed in principle between Barrick and the GoT will require
Acacia’s approval.
Financial Overview
The positive operational performance was not translated in
positive cash flow due to Acacia’s inability to export and sell a
total of 185,800 ounces of gold, 12.1 million pounds of copper and
158,900 ounces of silver contained in concentrate as a result of
the concentrate export ban. This includes 10,678 ounces of gold in
concentrate produced in late 2016 but not sold. This heavily
impacted our Bulyanhulu and Buzwagi mines which produced gold in
both doré and in concentrate form, while North Mara sales were
unaffected by the ban due to 100% of its production being doré.
This, together with an increase in indirect tax receivables, meant
that we ended the year with US$81
million of cash on our balance sheet, a decrease from
US$318 million on hand at the end of
the previous year. Net cash also fell, but we continued to repay
our CIL debt facility during 2017 and saw debt balances fall to
US$71 million at the end of 2017.
Post year end we completed the sale of a non-core royalty for
US$45 million and this, together with
the purchase of put options for a portion of future gold sales and
strong cost discipline will provide additional support to our
balance sheet.
Total revenue for the year amounted to US$752 million which was 29% lower than 2016 as a
result of the inability to sell gold, copper and silver contained
in concentrate as set out above during the year. The lack of sales
impacted EBITDA, which at US$257
million was 38% below 2016. Net earnings were impacted by
the lack of sales, but also by a post-tax non cash impairment
charge of US$644 million, primarily
associated with Bulyanhulu as a result of the increased uncertainty
in our operating environment and the movement to reduced
operations. This together with an increase in our uncertain tax
provision from US$128 million to
US$300 million drove a net loss of
US$707 million. Adjusted net earnings
amounted to US$146 million which was
9% below 2016.
Outlook
The group has successfully managed through a challenging
environment to deliver a year of resilient operational performance
in 2017. As a result of Bulyanhulu’s transition to reduced
operations and the planned transition of Buzwagi to a stockpile
processing operation in 2018 we expect to see a step-down in
production from 2017 levels to 435,000-475,000 ounces at increased
all-in sustaining cost of US$935-985
per ounce. Cash costs per ounce are also expected to increase to
between US$690-720 per ounce in 2018.
Group AISC and cash costs are both negatively impacted by
approximately US$50 per ounce due to
the release of non-cash high cost inventory at Buzwagi as we
process ore stockpiles previously classified as ore inventory. We
expect production to be broadly flat through the year although due
to the roll-over of cost from the movement to reduced operations at
Bulyanhulu into Q1 2018 we expect increased cash flow in the second
half of the year. All gold produced in 2018 is expected to be in
doré form.
At North Mara we expect production to be broadly in line with
2017 at approximately 325,000 ounces as the continued increase in
production from the Gokona Underground is offset by lower open pit
tonnes and grade as the Nyabirama Stage 3 open pit is completed and
all ore is sourced from the beginning of the Stage 4 pit. AISC is
expected to be approximately US$850
per ounce, approximately 5% higher than 2017, driven by an increase
in cash costs due to the increased mining activity and increased
allocation of corporate shared services costs. During 2018 we will
continue to progress the drilling programmes at Gokona, which led
to a doubling of underground reserves in 2017 to 1.3Moz at a grade
of 6.3 g/t. At Nyabirama we are also progressing the permitting for
an underground exploration decline, this process is expected to be
completed in 2018.
At Bulyanhulu we completed the transition to reduced operations
in the fourth quarter, which regrettably led to the retrenchment of
the majority of the workforce at the mine. In total, the
retrenchments, together with the cancellation of supply contracts,
led to a cost of US$25 million, with
US$20 million incurred in Q4 2017 and
the balance due to be incurred in Q1 2018. In addition we saw an
outflow of accounts payable of approximately US$35 million, of which US$5 million is expected to be incurred in Q1
2018. Whilst the mine is on reduced operations, at a monthly cost
of approximately US$3 million, Acacia
is taking the opportunity to progress essential capital spend of
approximately US$10 million,
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. These costs are excluded from AISC on the
principle that they are not representative of operational costs.
The study is expected to take until H2 2018 to be completed and as
a result Acacia does not expect the underground mine to restart in
2018 and is targeting a phased restart through 2019, assuming the
concentrate ban is resolved during 2018. The mine will continue
with the re-processing of tailings through 2018 at an annual
production rate of approximately 30,000 ounces and an AISC of
approximately US$1,000 per ounce,
which will partially offset the cost of reduced operations.
As previously guided, Buzwagi is transitioning to a stockpile
processing operation in 2018 as a result of the effective
completion of the open pit and will see a step down in production
as a result. During 2017 the mine exceeded its production plan by
15,000 ounces whilst delivering over 5 million tonnes of ore to the
stockpile, albeit at lower grades. As a result expected life of
mine production has increased by approximately 100,000 ounces. In
2018, mill feed will be almost exclusively from the stockpiles and
as a result head grades are expected to drop significantly
resulting in production for the year being approximately 100,000
ounces. As a result of the lower production and release of non-cash
high cost inventory of approximately US$200 per ounce, reported AISC is due to
increase to approximately US$1,100
per ounce sold, although we are looking to optimise the cost
profile as we transition to stockpile processing.
As a result of reduced operations at Bulyanhulu we expect to see
Group capital expenditure in 2018 fall to approximately
US$100 million. This is comprised of
approximately US$50 million of
capitalised development / stripping at North Mara, US$35 million of sustaining capital, primarily at
North Mara, and US$15 million of
expansion capital, made up predominantly of investment in the
process plant at Bulyanhulu and capitalised drilling at North Mara
as we look to delineate additional resources to support a 10 year
life of mine producing in excess of 300,000 ounces per annum.
Acacia is committed to strong cost discipline and is continuing
to take steps to ensure the long-term viability of our business
whilst we await an outcome of the discussions between Barrick and
the Government of Tanzania. During
2017 Acacia made significant decisions at both the Bulyanhulu and
Buzwagi operations and we should now be able to sell all of the
gold we produce going forward. We continue to take steps to protect
the balance sheet including a reduction in planned greenfield
exploration spend in 2018 to US$15
million, and whilst we currently anticipate corporate
overheads being in line with 2017, we are targeting reducing this
spend during the year.
Contribution to Tanzania
Acacia continues to share the Government of Tanzania’s goals of
enhancing the country’s social and economic development and in 2017
contributed US$143 million in taxes
and royalties to Tanzania. Since
the inception of its businesses, over 15 years ago, the Company,
and its predecessors, have invested over US$4 billion into the country to build and
sustain our mines, spent over US$3
billion with Tanzanian suppliers to support the operation of
our businesses, invested over US$75
million into our communities and paid over US$1 billion in taxes and royalties. We have also
built a 60 kilometre water pipeline to supply clean water to
communities around Bulyanhulu, invested US$45 million to provide electricity to
communities, built and renovated 57 schools in the Lake Zone whilst
providing over 18,000 desks and building 129 teachers houses.
In terms of developing sustainable communities around our mines
over the last five years, Acacia has invested heavily in building
social infrastructure such as schools, roads, health and water
facilities in close cooperation with its surrounding population. In
2017 we began the implementation of the new Sustainable Communities
(“SC”) Strategy which focuses on adding further value to this
physical infrastructure and contributing positively to the
development of a diversified local economy in our zone of
influence. We believe that the SC Strategy is aligned with
Tanzania’s national development agenda, as well as the United
Nations’ Sustainable Development Goals.
By the end of 2017 we had achieved an approximate 80% delivery
rate on our infrastructure legacy commitments. This included the
completion and/or initiation of a number of projects at all three
mines. Projects included a US$500,000
upgrade of the Bugarama Health Centre at Bulyanhulu which supports
healthcare for 58,000 people living in the 14 villages in Kakola
and its surrounding areas. The focus at Buzwagi has been the
construction of a new dormitory at Mwendakulima Secondary School
for female pupils after the original dormitory was accidentally
destroyed in a fire. The new dormitory will accommodate more than
100 pupils and make secondary education more accessible to girls.
At North Mara we constructed the Nyamwaga and Kerende Health
Centres and invested in the Nyamwaga/Keisangora water projects
designed to improve access to clean water.
Operating Environment
On 3 March 2017, the Ministry of
Energy and Minerals of the Tanzanian Government announced a general
ban on the export of metallic mineral concentrates following a
directive made by the President of the United Republic of
Tanzania. Following the directive,
we immediately ceased all exports of our gold/copper concentrate
including the 277 containers that had been approved for export
prior to the ban and which remain impounded in Dar es Salaam at
either the port or a staging warehouse. As mentioned above, the
export ban impacts Bulyanhulu and Buzwagi which ordinarily produced
a proportion of their gold in concentrate form due to the
mineralogy of the ore at those two mines. North Mara production and
sales were unaffected by the ban on export of concentrates due to
100% of its production being doré.
During the second quarter of 2017 two Presidential Committees
announced their findings following investigations into the
technical and economic aspects of the historic exports of
gold/copper concentrates. Acacia has fully refuted the implausible
findings of both committees, which claimed that Acacia and its
predecessor companies had historically and significantly
under-declared the contents of exports of concentrate. Acacia
reiterates that it has declared everything of commercial value that
it has produced since it started operating in Tanzania and has paid all appropriate
royalties and taxes on all of the payable minerals that it has
produced. Acacia has requested copies of the reports of the two
Presidential Committees and called for independent verification of
the results announced by the Committees, but to date has not
received a response to these requests.
In late June 2017, new legislation
was proposed which made significant changes to the legal and
regulatory framework governing the natural resources sector as a
whole in Tanzania. Post year-end
new mining regulations were also issued which are currently being
reviewed. Prior to the legislation being passed into law in early
July 2017, in order to protect the
Company, Bulyanhulu Gold Mine Limited (“BGML”), the owner of the
Bulyanhulu mine, and Pangea Minerals Limited (“PML”), the owner of
the Buzwagi mine, each commenced international arbitrations against
the GoT in accordance with the dispute resolution processes agreed
by the GoT in the Mineral Development Agreements (“MDAs”) with BGML
and PML. These arbitrations remain ongoing. Acacia continues to
monitor the impact of the new legislation in light of its MDAs with
the GoT. However, to minimise further disruptions to our operations
we have been, in the interim, satisfying the requirements imposed
by the new legislation as regards the increased royalty rate
applicable to metallic minerals such as gold, copper and silver of
6% (increased from 4%), in addition to a new 1% clearing fee on
mineral exports. These payments are being made under protest,
without prejudice to our legal rights under our MDAs.
In July, BGML and PML received adjusted tax assessments from the
Tanzanian Revenue Authority (“TRA”) totalling US$190 billion for alleged unpaid taxes, interest
and penalties, apparently issued in respect of alleged and disputed
under-declared export revenues, and appearing to follow on from the
announced findings of the First and Second Presidential Committees.
Acacia refutes the findings of each Committee, re-iterates that it
has fully declared all revenues, and has requested copies of the
reports of the Committees and independent expert verification of
their findings. Acacia has requested the TRA to provide
calculations and the necessary substantiation to support these
assessments as well as a subsequent conflicting set of adjusted
assessments for PML which amount to US$3
billion and appear to relate to the historical operation of
the Tulawaka mine at which PML ceased operations in 2013. The TRA
has so far not provided its calculations or substantiation for the
adjusted assessments, and Acacia is objecting to and defending
these through the Tanzanian tax appeals processes. The allegations
made by the First and Second Committees are included in the matters
that have already been referred to international arbitration by
BGML and PML. In addition, the Company continues to dispute and
defend in accordance with Tanzanian law and procedure the
outstanding tax claims previously reported as having been brought
by the TRA against Acacia Mining plc, on the purported basis that
Acacia itself has established tax residence in Tanzania. These appeals remain the subject of
the Tanzanian tax appeals processes.
In July 2017, Barrick, Acacia’s
majority shareholder, announced that it had commenced discussions
with the GoT aimed at identifying a possible solution to Acacia’s
disputes with the GoT. The GoT informed Barrick that it wished to
continue their dialogue, and therefore Acacia has not participated
directly in these discussions.
In October 2017, Barrick and the
GoT announced that they had agreed a framework proposing a new
partnership between Acacia and the GoT. As announced by Barrick,
the key terms of the proposal included that: the economic benefits
generated by the Company’s operations in Tanzania would be shared between Acacia and
the GoT on a 50/50 basis going forward, to be delivered in the form
of royalties, taxes and a 16% free carry interest in the operating
mines; the establishment of a new Tanzanian operating company to
manage the mining operations, with GoT participation in
decision-making on certain issues; a number of social licence to
operate projects and commitments; there would be further work with
the GoT to advance concepts for increasing in-country beneficiation
of gold; and Acacia would make a US$300
million payment, staged over time, in respect of outstanding
tax claims between Acacia and the GoT.
Since October, Barrick and the GoT have continued discussions
aimed at agreeing and documenting the details of the announced
framework, and Barrick have announced that they are targeting
completion in H1 2018. Acacia continues to support Barrick in its
discussions with the Tanzanian Government towards identifying a
possible negotiated resolution. Acacia is not directly involved in
the ongoing discussions, and awaits a detailed agreed proposal and
documented final agreements for a comprehensive settlement, which
will be reviewed by an Independent Committee of the Company’s
Directors.
Safety
Safety performance during 2017 demonstrated significant progress
on the previous year. The Company recorded a Group-wide Total
Recordable Injury Frequency Rate (‘TRIFR’) of 0.45 compared to 0.74
in 2016, a 39% improvement. The number of Lost Time Injuries
(‘LTI’) decreased from 32 in 2016 to 18 in 2017, a 44% improvement,
and the injury severity rate decreased by 35%. We also progressed a
number of initiatives within an occupational health and safety
context to increase the effectiveness of existing occupational
health programmes and continued to progress health assessments,
including malaria control assessments, for our employees and wider
community base. The total number of malaria cases and the days lost
due to malaria decreased by 29% and 51% respectively during
2017.
Carrying Value Review and Tax
Provision
Acacia has identified a number of potential triggers for
impairment testing of the carrying value of its assets, including
but not limited to, the challenges experienced in the operating
environment in Tanzania, the
announcement of new legislation by the GoT in respect of the
natural resources sector and the resulting decision to reduce
operations at Bulyanhulu. As a result, Acacia has undertaken a
carrying value review of the Group’s affected Cash Generating Units
(CGUs).
Acacia considers that in accordance with applicable accounting
standards, carrying values for the CGUs should be calculated by
reference to the key terms of the Framework announcements made by
Barrick and by the GoT in October
2017 and discussed above, with additional discounting to
reflect the uncertainty around the final terms of any comprehensive
settlement that might be reached. While Acacia continues to provide
support to Barrick in its discussions with the GoT, Acacia has not
yet received for review and approval a detailed proposal that has
been agreed between Barrick and the GoT, and 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 would prefer a negotiated resolution, but believes that
there remain a range of potential outcomes to the current
situation.
This carrying value review demonstrates a potential reduction in
value at all three operating assets, but Buzwagi and North Mara
have sufficient headroom above their current carrying values. At
Bulyanhulu, however, the impact of the changes was greater, due to
the long life of the mine and the delay to a return to positive
cash generation due to the move to reduced operations. Acacia has
therefore recorded a net impairment of US$632 million for Bulyanhulu, which includes a
pre-tax write-down of US$122 million
for goodwill. In addition we have recorded an impairment charge of
US$12 million for the Nyanzaga
Project to reflect the current estimate for the potential impact of
the new mining laws on the carrying value of the project, which now
stands at US$34 million.
In addition to the above net impairment, Acacia has also raised
an additional tax provision of US$172
million relating to the estimated uncertain tax positions
for its operating companies, based on an estimate of the impact of
a comprehensive settlement reflecting the key terms of the
Framework announcements. This brings 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 is 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.
Reserves and Resources
Notwithstanding the performance of the gold price in 2017 we
have taken the decision to maintain the 2016 gold price assumptions
in our Reserve and Resource calculations. This not only brings
consistency of planning on an annual basis but it also helps
underpin the financial robustness of our long-term planning. Our
Reserve pricing is maintained at US$1,100 per ounce and our resource pricing has
been maintained at US$1,400 per
ounce.
On a Group basis, our overall Reserves and Resources decreased
slightly from 27.6 million ounces (“Moz”) to 27.4Moz during the
year with total Reserves marginally decreasing from 7.6Moz to
7.5Moz driven by depletion.
At North Mara, Reserves increased by 438,000 ounces (23%) from
1.9Moz in 2016 to 2.3Moz. This was driven by successful drilling
programmes at the Gokona Underground where Reserves increased from
656,000 ounces at 6.0 g/t to 1,338,000 ounces at 6.3 g/t, despite
depletion of 188koz during the year. This is the first step in
demonstrating the long term potential of the Gokona
Underground.
At Bulyanhulu, overall Reserves decreased by 417koz with the
underground Reserve now amounting to 4.5Moz at 9.70 g/t compared to
4.9Moz at 9.76 g/t. The change included depletion of 223koz and a
further reduction of 199koz due to changes to the short and medium
term designs. A study completed on remnant mining around the Upper
Reef 1 and Reef 2 areas indicated positive economics and added
151koz to Reserves. The Tailings Reserve decreased to 180koz ounces
at 1.05 g/t due to depletion. During 2018 we expect to review the
mine reserves in the context of the optimisation study currently
underway.
At Buzwagi, Reserves declined due to depletion as the final
stage of the open pit was effectively completed. However, during
2017, the run-of-mine stockpile, which will be processed over the
next three years, increased by 5 million tonnes with a 48% increase
in contained gold to 414koz ounces, albeit at lower grades of
0.91g/t.
At our exploration properties overall resources remained flat
with the addition of resources in Kenya being offset by the removal of the
Golden Ridge project from resource and a reduction in resource at
Nyanzaga. After completing a significant exploration drilling
programme during the year at the Liranda Project in Kenya we updated the Maiden Inferred Mineral
Resource declared in February 2017.
The updated model showing that the Isulu Inferred Resource has
changed with additional drilling confirming structural complexity.
The enhanced modelling of the Isulu resource has upgraded
confidence and increased grade. Additionally the upper parts of two
zones in the Bushiangala Prospect were upgraded from mineral
inventory to an Inferred Resource Estimate. The updated Inferred
Resource Estimate returned 2.5 million tonnes at 12.9 g/t Au for
1.044 million ounces at Isulu and for Bushiangala 374,600 tonnes at
10.5 g/t Au for 126,600 ounces for a project total of 2.9 million
tonnes at 12.6 g/t for 1.2Moz.
Board and Management Changes
At the end of 2017, there were a number of senior management
departures, with Brad Gordon, CEO,
Andrew Wray, CFO, Mark Morcombe, COO and Peter Spora, Head of Discovery stepping down.
Brad Gordon and Andrew Wray were instrumental in the turnaround
of the business over the past four years, with Mark Morcombe embedding operational discipline
and Peter Spora spearheading our
growth across Africa. Acacia
wishes them all well for the future. Whilst it was disappointing to
see these experienced and valued colleagues depart, we have
significant depth within the business. My 35 years of industry
experience primarily in African gold mining and alongside our new
CFO, Jaco Maritz’s 15 years of
experience in the Acacia business, ensures we have the right team
to lead the stabilisation of the company over the next twelve
months and then onto the next stage in its development.
With respect to the Board, during the year Peter Tomsett and Ambassador (retd) Juma
Mwapachu stepped down from the Board, and at the beginning of 2018
I replaced Brad Gordon on the Board
of Directors. In addition, Michael
Kenyon has been appointed as the Senior Independent Director
of the Company, in light of his role as Chair of the Company’s
Independent Committee. Following these changes, the Acacia Board
comprise of seven members, including four Independent Non-Executive
Directors, two Non-Executive Directors and one Executive Director.
Acacia would like to thank Brad, Peter and the Ambassador for their
valuable commitment and support to the Company during their tenure
on the Board and wish them all the best for the future.
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 inability to export
concentrates Acacia has experienced negative free cash flow in 2017
and therefore the Board of Directors has not recommended the
payment of a final dividend.
Finally, I would like to thank all of my colleagues for their
commitment, resilience and continued focus during what has been a
challenging year for Acacia. I would also like to thank our Board
for their support. We continue to prefer a negotiated solution to
our disputes with the Government of Tanzania, continue to support Barrick in its
discussions with the Government, and remain hopeful for a
resolution during 2018.
Peter
Geleta
Interim Chief Executive Officer
Key
Statistics |
Three months ended 31 December |
Year ended 31 December |
(Unaudited) |
2017 |
2016 |
2017 |
2016 |
Tonnes
mined (thousands of tonnes) |
5,270 |
9,644 |
31,917 |
38,491 |
Ore
tonnes mined (thousands of tonnes) |
2,274 |
2,584 |
13,707 |
9,419 |
Ore
tonnes processed (thousands of tonnes) |
1,855 |
2,567 |
8,719 |
9,818 |
Process recovery rate exc. tailings reclaim (percent) |
91.1% |
92.5% |
92.4% |
92.3% |
Head
grade exc. tailings reclaim (grams per tonne) |
2.8 |
3.2 |
3.3 |
3.3 |
Process recovery rate inc. tailings reclaim (percent) |
90.2% |
88.9% |
90.0% |
88.5% |
Head
grade inc. tailings reclaim (grams per tonne) |
2.8 |
2.9 |
3.0 |
3.0 |
Gold
production (ounces) |
148,477 |
212,954 |
767,883 |
829,705 |
Gold
sold (ounces) |
147,636 |
209,292 |
592,861 |
816,743 |
Copper
production (thousands of pounds) |
- |
4,255 |
12,897 |
16,239 |
Copper
sold (thousands of pounds) |
- |
3,384 |
1,341 |
14,745 |
Cash
cost per tonne milled exc. tailings reclaim
(US$/t)1 |
48 |
66 |
43 |
62 |
Cash
cost per tonne milled inc. tailings reclaim
(US$/t)1 |
46 |
55 |
40 |
53 |
Per
ounce data |
|
|
|
|
Average spot gold price2 |
1,275 |
1,222 |
1,257 |
1,251 |
Net average realised gold
price1 |
1,296 |
1,211 |
1,260 |
1,240 |
Total cash cost1 |
581 |
679 |
587 |
640 |
All-in sustaining cost1 |
779 |
952 |
875 |
958 |
Average realised copper price (US$/lb) |
- |
2.45 |
2.98 |
2.21 |
Financial results
|
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited, in US$'000 unless otherwise stated) |
2017 |
2016 |
|
2017 |
2016 |
Revenue |
189,249 |
263,890 |
|
751,515 |
1,053,532 |
Cost
of sales |
(108,942) |
(196,314) |
|
(458,447) |
(727,080) |
Gross profit |
80,307 |
67,576 |
|
293,068 |
326,452 |
Corporate administration |
(7,613) |
(6,218) |
|
(26,913) |
(21,895) |
Share
based payments |
(186) |
9,795 |
|
8,236 |
(29,929) |
Exploration and evaluation costs |
(3,384) |
(7,330) |
|
(24,829) |
(24,020) |
Corporate social responsibility expenses |
(2,354) |
(3,068) |
|
(8,213) |
(10,665) |
Impairment charge |
(850,182) |
- |
|
(850,182) |
- |
Other
(charges)/income |
(46,567) |
1,208 |
|
(90,370) |
11,649 |
Loss/(profit) before net finance expense and taxation |
(829,979) |
61,963 |
|
(699,203) |
251,592 |
Finance income |
140 |
365 |
|
1,944 |
1,512 |
Finance expense |
(3,971) |
(2,644) |
|
(12,407) |
(11,047) |
Loss/(profit) before taxation |
(833,810) |
59,684 |
|
(709,666) |
242,057 |
Tax
credit/(expense) |
47,835 |
(11,399) |
|
2,272 |
(147,113) |
Net
(loss)/profit for the period |
(785,975) |
48,285 |
|
(707,394) |
94,944 |
1 These are non-IFRS financial performance measures
with no standard meaning under IFRS. Refer to “Non IFRS measures”
on page 33 for definitions.
2 Reflect the London PM fix price.
For further information, please visit our website:
http://www.acaciamining.com/ or contact:
Acacia Mining plc |
+44 (0) 207 129 7150 |
Peter Geleta, Interim Chief
Executive Officer
Jaco Maritz, Chief Financial
Officer
Giles Blackham, Head of Investor
Relations & Corporate Development
Camarco |
+44 (0) 20 3757 4980 |
Gordon Poole / Nick Hennis
About Acacia Mining plc
Acacia Mining plc (LSE:ACA) is Tanzania’s largest gold miner and
one of the largest producers of gold in Africa. We have three mines, all located in
north-west Tanzania: Bulyanhulu,
Buzwagi, and North Mara and a portfolio of exploration projects in
Kenya, Burkina Faso and Mali.
Our approach is focused on strengthening our core pillars; our
business, our people and our relationships, whilst continuing to
invest in our future. Our ambition is to create a leading African
Company.
Acacia is a UK public company headquartered in London. We are listed on the Main Market of
the London Stock Exchange with a secondary listing on the Dar es
Salaam Stock Exchange. Barrick Gold Corporation is our majority
shareholder. Acacia reports in US dollars and in accordance with
IFRS as adopted by the European Union, unless otherwise stated in
this report.
Conference call
A presentation will be held for analysts and investors on
12 February 2018 at Noon London
time.
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 dial
in +44
20 3936 2999
Password:
506844
FORWARD- LOOKING STATEMENTS
This report includes “forward-looking
statements” that express or imply expectations of future events or
results. Forward-looking statements are statements that are not
historical facts. These statements include, without limitation,
financial projections and estimates and their underlying
assumptions, statements regarding plans, objectives and
expectations with respect to future production, operations, costs,
projects, and statements regarding future performance.
Forward-looking statements are generally identified by the words
“plans,” “expects,” “anticipates,” “believes,” “intends,”
“estimates” and other similar expressions.
All forward-looking statements involve a number of risks,
uncertainties and other factors, many of which are beyond the
control of Acacia, which could cause actual results and
developments to differ materially from those expressed in, or
implied by, the forward-looking statements contained in this
report. Factors that could cause or contribute to differences
between the actual results, performance and achievements of
Acacia include, but are not limited to, changes or developments
in political, economic or business conditions or national or local
legislation or regulation in countries in which Acacia
conducts - or may in the future conduct - business, industry
trends, competition, fluctuations in the spot and forward price of
gold or certain other commodity prices (such as copper and diesel),
currency fluctuations (including the US dollar, South African rand,
Kenyan shilling and Tanzanian shilling exchange rates),
Acacia’s ability to successfully integrate acquisitions,
Acacia’s ability to recover its reserves or develop new
reserves, including its ability to convert its resources into
reserves and its mineral potential into resources or reserves, and
to process its mineral reserves successfully and in a timely
manner, Acacia‘s ability to complete land acquisitions
required to support its mining activities, operational or technical
difficulties which may occur in the context of mining activities,
delays and technical challenges associated with the completion of
projects, risk of trespass, theft and vandalism, changes in
Acacia‘s business strategy including, the ongoing implementation
of operational reviews, as well as risks and hazards associated
with the business of mineral exploration, development, mining and
production and risks and factors affecting the gold mining industry
in general. Although Acacia‘s management believes that the
expectations reflected in such forward-looking statements are
reasonable, Acacia cannot give assurances that such
statements will prove to be correct. Accordingly, investors should
not place reliance on forward-looking statements contained in this
report.
Any forward-looking statements in this report only reflect
information available at the time of preparation. Save as required
under the Market Abuse Regulation or otherwise under applicable
law, Acacia explicitly disclaims any obligation or
undertaking publicly to update or revise any forward-looking
statements in this report, whether as a result of new information,
future events or otherwise. Nothing in this report should be
construed as a profit forecast or estimate and no statement made
should be interpreted to mean that Acacia‘s profits or
earnings per share for any future period will necessarily match or
exceed the historical published profits or earnings per share of
Acacia.
LSE: ACA
TABLE OF CONTENTS
|
|
Operating Review |
10 |
Exploration Review |
17 |
Financial Review |
25 |
Significant judgements in applying
accounting policies and key sources of estimation uncertainty |
32 |
|
|
Non-IFRS measures |
33 |
Risk Review |
37 |
Condensed Financial
Information: |
|
|
|
- Consolidated Income
Statement and Consolidated Statement of Comprehensive Income |
38/39 |
- Consolidated Balance
Sheet |
40 |
- Consolidated
Statement of Changes in Equity |
41 |
- Consolidated
Statement of Cash Flows |
42 |
- Notes to the
Condensed Financial Information |
43 |
Reserves and Resources |
64 |
|
|
Operating Review
Despite the significant uncertainty caused by the operating
environment in Tanzania, Acacia
has continued to deliver improved safety performance, with a full
year Total Recordable Injury Frequency Rate (TRIFR) of 0.45
compared to 0.74 in 2016, a 39% improvement. This performance is
coupled with a significant decrease in the number of Lost Time
Injuries (‘LTI’) which decreased from 32 in 2016 to 18 in 2017, a
44% improvement, and the injury severity rate, which decreased by
35%.
During 2017, Acacia delivered production of 767,883 ounces, a
decrease of 7% year on year, while AISC of US$875 per ounce sold and cash cost of
US$587 per ounce sold were 9% and 8%
lower than 2016 respectively. As a result of the ban on the export
of gold/copper concentrate, sales ounces trailed production by
approximately 175,022 ounces. If sales ounces equalled production,
AISC would have been approximately US$798 per ounce and cash costs would have been
approximately US$576 per ounce.
North Mara achieved full year production of 323,607
ounces, 14% lower than in 2016. This was a result of a 13% lower
head grade driven by lower grades received from the Gokona
underground primarily due to the focus on the lower grade West
Zone. The lower head grade was also impacted by lower grades
received from the Nyabirama pit due to increased mining from the
beginning of the Stage 4 open pit. Gold ounces sold for the year of
324,455 ounces were in line with production, but 14% lower than
2016 due to the lower production base. AISC of US$803 per ounce sold was 10% higher than 2016
primarily due to higher cash costs and the lower production base,
partly offset by lower capitalised development and lower sustaining
capital costs.
At Buzwagi, record gold production of 268,785 ounces was
66% higher than in 2016, and higher than expectations. This was
mainly due to a 75% higher head grade as a result of higher grade
ore mined from the main ore zone at the bottom of pit. Gold sold
for the year amounted to 160,552 ounces, in line with 2016 and 40%
lower than production, a direct result of the inability to export
concentrate. AISC per ounce sold of US$667 was 39% lower than 2016, mainly driven by
lower cash costs.
At Bulyanhulu, gold production of 175,491 ounces was 39%
lower than the prior year. This was due to a 34% decrease in
run-of-mine tonnes for the year primarily due to the decision to
transition Bulyanhulu into reduced operations at the end of Q3
2017. In addition a drought experienced in the Kahama district led
to nearly a 4 month halt in production from reprocessed tailings
which meant that production was 36% lower than the previous year.
Gold sales for the year were 107,855 ounces, 39% behind production
due to the impact of the concentrate export ban. The impact of the
lower sales and production base led to AISC per ounce sold being
30% higher than 2016 at US$1,373
although this was partly offset by lower capitalised development
costs and lower sustaining capital spend.
Total tonnes mined during the year amounted to 31.9 million
tonnes, 17% lower than 2016, mainly as a result of a 63% decrease
in total waste tonnes mined at Buzwagi as the open pit effectively
concluded at the end of the year. Ore tonnes mined of 13.7 million
tonnes were 46% higher than 2016 predominantly driven by increased
ore tonnes from Buzwagi as a result of improved access to ore zones
in the final stage of the open pit in 2017.
Ore tonnes processed amounted to 8.7 million tonnes, 11% lower
than in 2016. This was mainly due to lower reprocessed tailings
throughput at Bulyanhulu following the halt of production from
September to November due to water shortages as well as the impact
of the lower run of mine tonnes.
Head grade for the period (excluding tailings retreatment) of
3.3g/t was in line with 2016, the lower head grade at North Mara
was offset by the higher head grade at Buzwagi as a result of
higher grade ore mined at the main ore zone.
Cash costs of US$587 per ounce
sold for the year were 8% lower than in 2016 (US$640 per ounce sold), primarily due to:
- Increased investment in ore stockpiles, mainly at Buzwagi due
to the higher production base (US$50/oz);
- Lower G&A costs mainly at Bulyanhulu driven by lower stock
write downs, lower logistic and warehousing costs and lower camp
costs as well as lower aviation costs at all sites (US$40/oz);
- Lower consumable costs mainly driven by lower usage at
Bulyanhulu and improved consumable unit costing and usage
optimisation at Buzwagi (US$32/oz);
These were offset by:
- Lower sales volumes partly offset by a build-up in finished
goods ounces mainly at Bulyanhulu and Buzwagi (US$85/oz);
- Lower co-product revenue in the form of copper concentrates due
to a lack of concentrate exports (US$54/oz) and
- Lower capitalised mining cost, mainly driven by the halting of
development activities at Bulyanhulu, and at North Mara, due to a
decrease in capitalised stripping costs relating to the Nyabirama
Cut 4 cutback and lower underground waste development costs
(US$51/oz).
Included in cost of sales and ultimately cash cost for 2017 is a
credit of approximately US$94.2
million (US$157/oz) relating
to the build-up in finished gold inventory due to concentrate sales
delays, which largely offsets the impact of the reduction in sales
ounces in the cash cost per ounce sold calculation.
All-in sustaining cost of US$875
per ounce sold was 9% lower than in 2016, despite the lag in sales
against production. This was driven by the lower capitalised
development costs at both North Mara and Bulyanhulu (US$64/oz), a credit relating to share based
payment revaluation driven by the approximate 47% reduction in the
Acacia share price during the year (US$64/oz), lower cash costs (US$53/oz) as explained above and lower sustaining
capital spend at Bulyanhulu and North Mara (US$28/oz), partly offset by the impact of lower
sales volumes on individual cost items (US$120/oz).
If our sales ounces equalled production, AISC would have been
approximately US$798 per ounce sold,
compared to US$945 per ounce sold on
the same basis in 2016, a decrease of 16%, and excluding the impact
of non-cash share based payment revaluation credits would have been
approximately US$809.
Cash generated from operating activities was an outflow of
US$23.0 million which was a decrease
of US$340.9 million from 2016
(US$318.0 million). The inability to
export our concentrate since Q1 2017 has had a negative impact on
operating cash flow of approximately US$245.0 million. Working capital outflows mainly
relating to an increase in indirect tax receivables and to
increases in supplies inventory, settlement of trade and other
payables, and other current assets which included the North Mara
corporate tax deposit further impacted cash generated from
operating activities.
Capital expenditure amounted to US$149.4
million, 24% lower compared to the capital expenditure of
US$195.9 million in 2016. Capital
expenditure primarily comprised of capitalised development and
stripping (US$100.6 million),
investment in fixed equipment and mining infrastructure at
Bulyanhulu (US$9.0 million) and at
North Mara (US$13.7 million),
investment in mobile equipment and component change-outs at both
North Mara and Bulyanhulu (US$8.1
million) and land purchases at North Mara (US$1.6 million).
Mine Site Review
Bulyanhulu
Key statistics
|
|
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
Key operational
information: |
|
|
|
|
|
|
Ounces
produced |
oz |
2,855 |
79,859 |
|
175,491 |
289,432 |
Ounces
sold |
oz |
376 |
74,803 |
|
107,855 |
279,286 |
Cash
cost per ounce sold12 |
US$/oz |
- |
784 |
|
840 |
722 |
AISC
per ounce sold12 |
US$/oz |
- |
1,061 |
|
1,373 |
1,058 |
Copper
production |
Klbs |
- |
1,707 |
|
3,906 |
6,391 |
Copper
sold |
Klbs |
- |
1,309 |
|
588 |
5,570 |
Run-of-mine: |
|
|
|
|
|
|
Underground ore tonnes hoisted |
Kt |
- |
244 |
|
596 |
909 |
Ore
milled |
Kt |
- |
263 |
|
612 |
933 |
Head
grade |
g/t |
- |
9.1 |
|
8.6 |
9.3 |
Mill
recovery |
% |
- |
91.8% |
|
90.1% |
91.4% |
Ounces
produced |
oz |
- |
70,808 |
|
153,279 |
254,552 |
Cash
cost per tonne milled1 |
US$/t |
- |
209 |
|
126 |
197 |
Reprocessed
tailings: |
|
|
|
|
|
|
Ore
milled |
Kt |
105 |
451 |
|
1,010 |
1,650 |
Head
grade |
g/t |
1.4 |
1.3 |
|
1.4 |
1.4 |
Mill
recovery |
% |
58.7% |
47.2% |
|
48.0% |
45.8% |
Ounces
produced |
oz |
2,856 |
9,051 |
|
22,212 |
34,880 |
Capital
Expenditure |
|
|
|
|
|
|
- Sustaining capital |
US$('000) |
(2,447) |
3,833 |
|
9,033 |
20,231 |
- Capitalised development |
US$('000) |
337 |
15,996 |
|
39,543 |
63,082 |
- Expansionary capital |
US$('000) |
151 |
188 |
|
1,190 |
1,262 |
|
|
(1,959) |
20,017 |
|
49,766 |
84,575 |
- Non-cash
reclamation asset adjustments |
US$('000) |
(4,735) |
3,853 |
|
(4,158) |
10,728 |
Total capital
expenditure |
US$('000) |
(6,694) |
23,870 |
|
45,608 |
95,303 |
1These are non-IFRS financial performance measures
with no standard meaning under IFRS. Refer to ‘Non-IFRS measures”
on page 33 for definitions.
2Cash cost per ounce sold and AISC per ounce sold for
the quarter are non-meaningful due to the impact of negligible
sales ounces on the costs relating to reprocessed tailings.
Operating performance
Gold production of 175,491 ounces was 39% lower than 2016,
mainly driven by a 34% decrease in run-of-mine tonnes for the year
primarily due to the transition of Bulyanhulu into reduced
operations at the end of Q3 2017. In addition a drought experienced
in the Kahama district led to nearly a 4 month halt in production
from reprocessed tailings which meant that production was 39% lower
than the previous year. Gold production comprised of 95,116 ounces
in doré and 80,375 ounces in gold/copper concentrate.
Gold sold for the year of 107,855 ounces, was 39% lower than
production and 61% lower than 2016 mainly as a result of the
inability to export concentrate from early March combined with the
lower production base.
Copper production of 3.9 million pounds for the year was 39%
lower than 2016 mainly due to Bulyanhulu being on reduced
operations since the end of Q3 resulting in no concentrate
production for the rest of 2017, combined with lower copper grades
for the year. Copper sales were 89% lower than 2016 primarily due
to the lack of exports of concentrate.
Cash costs of US$840 per ounce
sold were 16% higher than 2016 (US$722), mainly due to the lower production base
(US$712/oz), lower co-product revenue
(US$116/oz) and lower capitalised
development costs (US$178/oz). This
was partly offset by lower G&A costs mainly due to lower
warehousing costs; lower stock write downs and lower camp costs
(US$207/oz), lower sales related
costs due to lower sales volumes (US$153/oz), lower maintenance cost (US$153/oz), lower consumables cost (US$152/oz), lower energy and fuel costs
(US$92/oz), lower labour costs due to
restructuring (US$66/oz) and lower
contracted services costs (US$46/oz).
AISC per ounce sold of US$1,373
was 30% higher than 2016 (US$1,058/oz) driven by the impact of lower sales
ounces on individual cost items (US$533/oz) and higher cash cost as explained
above (US$117/oz), partly offset by
lower capitalised development costs (US$218/oz) and lower sustaining capital spend
(US$104/oz). Should we have been able
to sell all ounces produced, AISC would have been approximately
US$1,122 per ounce.
Capital expenditure for the year before reclamation adjustments
amounted to US$49.8 million, 41%
lower than 2016 (US$84.6 million).
This was mainly driven by lower sustaining capital expenditure due
to the transition of Bulyanhulu to reduced operations and cash
saving initiatives implemented which resulted in projects being
deferred or cancelled as well as lower capitalised development
driven by the halt of underground mining activities. Capital
expenditure mainly consisted of capitalised underground development
costs (US$39.5 million), underground
ventilation raise borings (US$1.8
million), paste reticulation (US$1.5
million), ventilation fan upgrades (US$1.3 million) and a power stability project
(US$1.2 million).
The transition to reduced operations at Bulyanhulu which was
completed in the fourth quarter, regrettably led to the
retrenchment of the majority of the workforce at the mine. In
total, the retrenchments, together with the cancellation of supply
contracts led to a cost of US$25
million, with US$20 million
incurred in Q4 2017 and the balance due to be incurred in Q1 2018.
In addition we saw an outflow of accounts payable of approximately
US$35 million, of which US$5 million is expected to be incurred in Q1
2018. Whilst the mine is on reduced operations, at a monthly cost
of approximately US$3 million, Acacia
is taking the opportunity to progress essential capital spend of
approximately US$10 million,
primarily on the process plant, together with an optimisation study
which is designed to ensure that when the mine restarts is does so
in an optimised manner. The study is expected to take until H2 2018
to be completed and as a result Acacia does not expect the
underground mine to restart in 2018 and is targeting a phased
restart through 2019 assuming the concentrate ban is resolved
during 2018. The mine will continue with the re-processing of
tailings through 2018 at an annual production rate of approximately
30,000 ounces and an AISC of approximately US$1,000 per ounce, which will partially offset
the cost of reduced operations.
Buzwagi
Key statistics
|
|
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
Key operational
information: |
|
|
|
|
|
|
Ounces
produced |
oz |
73,604 |
41,912 |
|
268,785 |
161,830 |
Ounces
sold |
oz |
75,520 |
41,514 |
|
160,552 |
161,202 |
Cash
cost per ounce sold1 |
US$/oz |
535 |
1,035 |
|
594 |
1,031 |
AISC
per ounce sold1 |
US$/oz |
583 |
1,056 |
|
667 |
1,095 |
Copper
production |
Klbs |
- |
2,547 |
|
8,991 |
9,847 |
Copper
sold |
Klbs |
- |
2,075 |
|
752 |
9,175 |
Mining
information: |
|
|
|
|
|
|
Tonnes
mined |
Kt |
1,545 |
5,090 |
|
15,368 |
21,585 |
Ore
tonnes mined |
Kt |
1,321 |
1,509 |
|
9,309 |
5,317 |
Processing
information: |
|
|
|
|
|
|
Ore
milled |
Kt |
1,041 |
1,159 |
|
4,256 |
4,404 |
Head
grade |
g/t |
2.4 |
1.2 |
|
2.1 |
1.2 |
Mill
recovery |
% |
90.8% |
94.5% |
|
94.3% |
94.5% |
Cash
cost per tonne milled1 |
US$/t |
39 |
37 |
|
22 |
38 |
Capital
Expenditure |
|
|
|
|
|
|
- Sustaining capital |
US$('000) |
1,235 |
264 |
|
4,338 |
3,582 |
|
|
1,235 |
264 |
|
4,338 |
3,582 |
- Non-cash
reclamation asset adjustments |
US$('000) |
(2,192) |
3,312 |
|
(1,978) |
4,524 |
Total capital
expenditure |
US$('000) |
(957) |
3,576 |
|
2,360 |
8,106 |
1These are non-IFRS
financial performance measures with no standard meaning under IFRS.
Refer to “Non-IFRS measures” on page 33 for definitions.
Operating performance
Buzwagi delivered record gold production of 268,785 ounces for
2017 which was 66% higher than in 2016 mainly due to a 75% higher
head grade as a result of higher grade ore mined from the main ore
zone at the bottom of pit. Production for the year comprised of
113,035 ounces of gold in concentrate and 155,749 ounces of gold in
doré.
Gold sold for the year amounted to 160,552 ounces, in line with
2016 and 40% lower than production, a direct result of the
inability to export concentrate from early March 2017. As a result of this, in September 2017 Buzwagi ceased operating the
flotation circuit which had previously been planned to run into the
first part of 2018 but continued to run the existing gravity and
CIL circuits which resulted in gold production for the last 4
months of the year being solely in doré form. Prior to the change,
gold/copper concentrate made up approximately 60% of
production.
Buzwagi engaged extensively with relevant government agencies
regarding the processing trials, both prior to and after the
implementation of the decision to bring forward ceasing operation
of the flotation circuit. While ceasing to operate the
flotation circuit did not require prior regulatory approvals and
did not involve additional or new process plant or processing
technology, Buzwagi has recently received further correspondence
from the Ministry of Minerals requiring the restoration of
operation of the flotation circuit and seeking further explanations
from Buzwagi on the Government’s position regarding potentially
applicable regulatory approvals. The Company will continue to
engage closely with Government agencies on this and other operating
and regulatory issues.
Total tonnes mined of 15.4 million tonnes were 29% lower than
2016, primarily due to the focus of mining at the bottom of the pit
which contains more ore tonnes compared to waste tonnes resulting
in 75% higher ore tonnes mined during 2017 compared to 2016.
Copper production of 9.0 million pounds for the year was 9%
lower than the comparative period mainly due to the bypass of the
flotation circuit during September
2017 resulting in no copper production for the rest of 2017,
partly offset by increased copper grades. Copper sold was 92% lower
than 2016, primarily due to the lack of mineral concentrate
exports.
Cash costs for the period of US$594 per ounce sold were 42% lower than 2016
(US$1,031/oz), primarily driven by
the build-up in unsold ounces and increased investment in ore
stockpiles as a result of increased focus on ore mining
(US$411/oz), lower consumable spend
due to lower unit costs and optimisation of cyanide usage
(US$53/oz) and lower sales related
cost due to lower sales volumes (US$25/oz). This was partly offset by lower
co-product revenue in the form of copper concentrates (US$123/oz).
AISC per ounce sold of US$667 was
39% lower than 2016 (US$1,095/oz).
This was mainly driven by lower cash costs as explained above
(US$437/oz). Should we have been able
to sell all ounces produced, AISC would have been approximately
US$564 per ounce.
Capital expenditure before reclamation adjustments of
US$4.4 million was 21% higher than
2016 (US$3.6 million). Capital
expenditure for the year mainly consisted of the expansion of the
tailings storage facility (US$3.7
million).
As previously guided, Buzwagi is transitioning to a stockpile
processing operation in 2018 as a result of the effective
completion of the open pit and will see a step down in production
as a result. During 2017 the mine exceeded its production plan by
15,000 ounces whilst delivering over 5 million tonnes of ore to the
stockpile, albeit at lower grades. As a result expected life of
mine production has increased by approximately 100,000 ounces. In
2018, mill feed will be almost exclusively from the stockpiles and
as a result head grades are expected to drop significantly
resulting in production for the year being approximately 100,000
ounces. As a result of the lower production and release of non-cash
high cost inventory of approximately US$200 per ounce, reported AISC is due to
increase to approximately US$1,100
per ounce sold, although we are looking to optimise the cost
profile as we transition to stockpile processing.
North Mara
Key statistics
|
|
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
Key operational
information: |
|
|
|
|
|
|
Ounces
produced |
Oz |
72,018 |
91,183 |
|
323,607 |
378,443 |
Ounces
sold |
Oz |
71,740 |
92,975 |
|
324,455 |
376,255 |
Cash
cost per ounce sold1 |
US$/oz |
587 |
436 |
|
498 |
410 |
AISC
per ounce sold1 |
US$/oz |
903 |
850 |
|
803 |
733 |
Open pit: |
|
|
|
|
|
|
Tonnes
mined |
Kt |
3,572 |
4,182 |
|
15,299 |
15,556 |
Ore
tonnes mined |
Kt |
798 |
702 |
|
3,147 |
2,752 |
Mine
grade |
g/t |
1.7 |
2.1 |
|
1.7 |
1.9 |
Underground: |
|
|
|
|
|
|
Ore
tonnes trammed |
Kt |
153 |
127 |
|
654 |
440 |
Mine
grade |
g/t |
7.7 |
11.0 |
|
8.7 |
15.6 |
Processing
information: |
|
|
|
|
|
|
Ore
milled |
Kt |
708 |
693 |
|
2,841 |
2,830 |
Head
grade |
g/t |
3.5 |
4.4 |
|
3.9 |
4.5 |
Mill
recovery |
% |
91.5% |
92.1% |
|
92.0% |
92.0% |
Cash
cost per tonne milled1 |
US$/t |
59 |
59 |
|
57 |
55 |
Capital
Expenditure |
|
|
|
|
|
|
- Sustaining capital2 |
US$('000) |
5,370 |
13,739 |
|
22,563 |
28,317 |
- Capitalised development |
US$('000) |
13,328 |
21,929 |
|
61,066 |
75,609 |
- Expansionary capital |
US$('000) |
3,339 |
1,475 |
|
10,270 |
2,399 |
|
|
22,037 |
37,143 |
|
93,899 |
106,325 |
- Non-cash
reclamation asset adjustments |
US$('000) |
(3,325) |
3,319 |
|
(2,951) |
6,703 |
Total capital
expenditure |
US$('000) |
18,712 |
40,462 |
|
90,948 |
113,028 |
1These are non-IFRS financial performance measures
with no standard meaning under IFRS. Refer to ‘Non-IFRS measures”
on page 33 for definitions.
2 Includes land purchases recognised as long term
prepayments
Operating performance
North Mara’s gold production for the period of 323,607 ounces
was 14% lower than in 2016. This was as a result of a 13% lower
head grade driven by 44% lower mined grades received from the
Gokona Underground due to an increased proportion of ore being
sourced from the lower grade West Zone. The head grade was also
negatively impacted by 11% lower grades received from the Nyabirama
pit as an increased proportion of ore was mined from the beginning
of the Stage 4 of the open pit.
As North Mara solely produces gold in doré form it was
unaffected by the concentrate ban and gold ounces sold for the year
of 324,455 ounces were broadly in line with production, but 14%
lower than 2016 due to the lower production base.
Ore tonnes from underground mining were 49% higher than 2016,
due to Gokona Underground development providing access to more
stopes compared to 2016 despite the underground development
challenges experiences in the year due to a now resolved lack of
development contractors due to work permit issues. Cemented
Aggregate Fill (CAF) continues to be placed in primary stopes,
though further work is required on the plant to ensure that
forecast fill volumes can be maintained.
Cash costs of US$498 per ounce
sold were 21% higher than 2016 (US$410/oz), mainly driven by the lower production
base (US$66/oz), lower capitalised
development cost (US$35/oz), higher
consumable cost driven by higher CAF activities (US$18/oz) as well as higher energy and fuel costs
(US$11/oz). This was partly offset by
a build-up in ore stockpiles due to the higher ore tonnes mined
(US$31/oz) and lower external
services cost (US$9/oz).
AISC of US$803 per ounce sold was
10% higher than 2016 (US$733/oz)
primarily due to higher cash costs as explained above (US$88/oz) and the impact of the lower production
base (US$51/oz), partly offset by
lower capitalised development costs (US$45/oz) and lower sustaining capital
expenditure (US$18/oz).
Capital expenditure for the year before reclamation adjustments
of US$94.0 million was 12% lower than
in the prior year (US$106.3 million).
Key capital expenditure include capitalised stripping costs
(US$45.4 million), capitalised
underground development costs (US$15.7
million), capitalised drilling expenditure mainly relating
to Gokona resource and reserve development and Nyabirama
underground studies (US$9.4 million)
and investment in mobile equipment and component change-outs
(US$4.9 million). In addition,
US$1.6 million was spent on land
acquisitions primarily around the Nyabirama open pit. Land
acquisition costs are included in capital expenditure above as they
are included in AISC but are treated as long term prepayments on
the balance sheet.
In 2018 we expect production to be broadly in line with 2017 at
approximately 325,000 ounces as the continued increase in
production from the Gokona Underground is offset by lower open pit
tonnes and grade as the Stage 3 of the open pit is completed and
all ore is sourced from the Stage 4 pit. AISC is expected to be
approximately US$850 per ounce,
approximately 5% higher than 2017, driven by an increase in cash
costs due to the increased mining activity and increased allocation
of corporate shared services costs. During 2018 we will continue to
progress the drilling programmes at Gokona, which led to a doubling
of underground reserves in 2017 to 1.3Moz at a grade of 6.3 g/t and
at Nyabirama, we are also progressing the permitting of an
underground exploration decline which is expected to be completed
in 2018.
Exploration Review
Brownfield Exploration
Tanzania
In 2017, brownfield exploration was focused predominantly at
North Mara, with underground diamond drilling at Gokona, and
further surface diamond drilling conducted on the Nyabirama deposit
to define the mineralised system below the planned final open pit.
Drilling at North Mara during 2017 resulted in significant
additions to the Mineral Reserve and Mineral Resource. The surface
drilling demonstrated the potential for further resource potential
up to 700 metres below the final Stage 4 Nyabirama pit. Underground
drilling also continued on the Reef 2 series at Bulyanhulu prior to
suspension of underground operations.
North Mara
Gokona Underground
In addition to the grade control drilling, approximately 33,000
metres of infill and extensional diamond drilling was completed at
Gokona Underground during 2017; with a maximum of 5 underground
diamond drill rigs in operation. The positive results from the
drilling, were incorporated into the year-end Resource update and
led to a doubling of Reserves from 656koz at 6.0g/t to 1,338koz at
6.3g/t, post depletion of over 188koz.
Significant drilling activity was focused on delineating the
western extension of the “Golden Banana” (East Zone) lode
mineralisation between the Gokona Fault and the completed Gokona
open pit; which is now termed the “GB2” zone. Several wide and high
grade intercepts were returned from this drill programme extending
the previously modelled mineralisation including:
|
- 33.0m @ 38.2 g/t Au from 36m
|
|
- 31.0m @ 14.7 g/t Au from 31m
|
|
- 24.8m @ 133.5 g/t Au from 35m
|
|
- 52.0m @ 11.4g/t Au from 35m
|
|
- 57.0m @ 31.8g/t Au from 54m
|
|
- 10.0m @ 75.7g/t Ay from 64m
|
|
- 26.0m @ 40.8g/t Au from 110m
|
|
- 23.0m @ 42.7g/t Au from 121m
|
The full set of drill data for GB2 was incorporated into the
updated Mineral Resource model, and development was commenced to
access the mineralisation during the Q4 2017, and first stope
production scheduled for Q1 2018.
The development of a drill drive on the 1030mRL elevation
advanced in 2017, with the initial four drill sites completed
during Q3 2017. Drilling commenced from three of these positions,
with initial drilling targeting continuation of mineralisation
below the existing open pit. Initial results received during Q4
2017 included:
|
- 22.0m @ 13.3g/t Au from 283m
|
|
- 28.0m @ 12.5 g/t Au from 251m
|
|
- 46.0m @ 6.6g/t Au from 197m
|
|
- 10.0m @ 6.3g/t Au from 78m
|
|
- 14.0m @ 7.8g/t Au from 71m
|
|
- 15.0m @ 9.5g/t Au from 120m
|
Exploration activity during 2018 at Gokona Underground will
continue to test the extension of the known mineralisation, with
41,000m of underground diamond
drilling budgeted.
Nyabirama
Follow-up extensional and infill surface diamond drilling was
completed at Nyabirama during 2017, in order to test the extent of
mineralisation down-plunge from the open pit, and allow
consideration of an underground mining option. The better
results from the 2017 drilling programmes included:
|
3.0m @ 66.6 g/t Au from 873m incl.
1m @ 198g/t Au from 874m, and |
|
5.0m @ 4.8 g/t Au from 890m |
|
6.0m @ 51.9 g/t Au from 592m incl.
1m @ 280g/t Au from 594m |
|
4.0m @ 10.8g/t Au from 264m, |
|
4.0m @ 26.7g/t Au from 325m,
and |
|
7.0m @ 9.50g/t Au from 464m |
|
11.5m @ 26.5g/t Au from 272m |
|
2.0m @ 87.9 g/t Au from 236m incl.
1m @ 161g/t Au from 237m, and |
|
2.0m @ 6.5 g/t Au from 408m,
and |
|
3.0m @ 3.8 g/t Au from 420.0m |
|
5.0m @ 8.5 g/t Au from 464m incl. 1m
@ 36g/t Au from 467m, and |
|
7.0m @ 12.8 g/t Au from 473m incl.
1m @ 81g/t Au from 475m |
|
2.4m @ 7.6 g/t Au from 324m,
and |
|
5.2m @ 5.9 g/t Au from 366.8m,
and |
|
13.5m @ 20.1 g/t Au from 377.5m |
|
|
Drilling completed in 2016 and 2017 was incorporated into an
underground Mineral Resource model. Following the Mineral Resource
model update, a provisional underground decline design was
developed along with development for drill positions to undertake
infill diamond drilling. Permitting for the decline is underway.
The conceptual drilling programme involves eight drill positions,
and approximately 41,000m of diamond
drilling to be completed progressively as the development advances.
In order to reduce expenditure commitments, further drilling at
Nyabirama was suspended in the Q3 2017. The decision was also taken
to defer any drilling until 2019, and hence reduce expenditure
commitments in 2018.
Bulyanhulu
Reef 2 Central
Underground diamond core drilling in 2017 was primarily focused
on infill drilling of Reef 2 to increase the level of confidence in
the Mineral Resource, and testing the Reef 1 structure in areas
where limited to no historic drill testing has been undertaken. A
total of 117 underground diamond drill core holes were completed
for 30,412 metres during H1 2017, testing both the Reef 1 and Reef
2 structures. The results demonstrated that the Reef 2m Central vein displays good continuity and
extended the mineralisation a further 100m vertically, and a further 150m in strike. Drilling activity at Bulyanhulu
was suspended in the second half of 2017, as the mine was moved to
Reduced Operations.
Greenfield Exploration
Kenya
During 2017 an extensive diamond drilling programme continued on
the Liranda Corridor Project within the Kakamega Dome Camp with
between four and seven drill rigs active. 86 diamond core (“DD”)
holes (41,988 meters) were completed on the Isulu (formerly
Acacia), Bushiangala, Shigokho and Shibuname Prospects.
Additionally, one reverse circulation (RC) rig completed
reconnaissance drilling across gold-in-soil anomalies on the
Barkalare and Kitson-Kerebe target areas in the Lake Zone Gold Camp
with 30 reverse circulation holes (“RC”) (3,250 metres)
drilled.
Kakamega Dome
Camp
Exploration activity has focused on the Bushiangala and Isulu
(formerly Acacia) prospects since high grade results were returned
in 2014 from the first pass diamond drilling programme following up
gold-in-soil anomalies along the Liranda Corridor. In 2015 and 2016
closed spaced diamond drilling programmes were undertaken
confirming multiple zones of mineralisation from 100 metres to 700
metres vertical depth at Isulu and from 100 metres to 400 metres at
Bushiangala. In 2017 a diamond drilling program of 44,500m was budgeted in order to finalise a
Maiden Inferred Resource Estimate on the Isulu Prospect in Q1 2017
and to further understand the potential size of the mineralised
zones (lateral and depth extensions). A total of 79 diamond holes
for 39,062 metres were completed on these prospects in 2017. Better
results received during 2017 from the Isulu and Bushiangala
Prospects included:
Isulu Prospect (formerly Acacia)
- LCD0158W1* - 2.5m @ 114 g/t Au
from 892m and 1.0m @ 11.0 g/t Au from 898m,
- LCD0158W3* – 3.7m @ 10.7 g/t Au
from 925m and 0.6m @ 21.0 g/t Au from 931m,
- LCD0161W1*† - 2.0m @ 37.0 g/t Au from 995m and 1m @ 21.5
g/t Au from 1,003m,
- LCD0161W3* - 2.0m @ 8.49 g/t Au
from 958m and 4.0m @ 2.27g/t Au from 972m,
- LCD0175*† - 3.0m @ 55.2 g/t Au from 129m,
- LCD00194 -1.5m @ 37.2 g/t Au from
342.3m,
- LCD00201 -1.5m @ 15.2 g/t Au from
114m.
Bushiangala Prospect
- LCD0173*† - 3.1m @ 7.07 g/t Au from 187m,
- LCD0174*† - 3.5m @ 6.70 g/t Au from 154m,
- LCD0176*† - 1.5m @ 12.0 g/t Au from 134m and 3.1m
@ 12.0 g/t Au from 175m,
- LCD0177*† - 1.5m @ 10.5 g/t Au from 114m,
- LCD0189* - 2.0m @ 12.7 g/t
Au from 164m,
- LCD0192* - 2.0m @ 23.1 g/t
Au from 166m
Note: * - holes reported during Q3 2017. †
Holes included in Q4 2017 Inferred Resource Estimate.
The gold mineralisation at Isulu is associated with mostly
steeply dipping shear zones ranging in true width from 0.5 metres
to 17 metres within a mafic volcanic sequence. The zones are
represented by shearing, brecciation, quartz veining, sulphides
(pyrite, +/-pyrrhotite, +/-sphalerite, +/-arsenopyrite,
+/-chalcopyrite, +/- molybdenite) and alteration (carbonate, +/-
sericite, +/- vanadium mica, +/- silica). Within the shears a total
of 9 mineralised zones have been modelled with a maximum strike
length of 514m. Vertical extent
ranges from 300m to 1000m while the plunge extent ranges from
300m to 1100m. The majority of the resource ounces lie
within 4 zones. The structures remain open at depth and to the east
down plunge.
At Bushiangala the gold mineralisation is modelled in four zones
contained within shears characteristically similar to Isulu. These
zones have a maximum strike length of 304m with a vertical extent ranging from
284m to 556m. The structures continue to the east and
down dip.
In Q1 2017 a Maiden Inferred Resource Estimate conforming to NI
43-101 guidelines was announced for the Isulu prospect, of 3.46
million tonnes at 12.1 g/t Au for 1.31 million ounces. An updated
Inferred Resource Estimate was completed using drill data and
interpretations to the end of August
2017; with the updated model showing that the Isulu Inferred
Resource has changed with additional drilling confirming structural
complexity.
The enhanced modelling of the Isulu resource has upgraded
confidence and increased grade, although has led to reduced ounces.
Additionally the upper parts of two zones in the Bushiangala
Prospect were upgraded from mineral inventory to an Inferred
Resource Estimate. The updated Inferred Resource Estimate completed
for the year-end returned 2.5 million tonnes @ 12.9 g/t Au for
1.044 million ounces at Isulu and for Bushiangala 374,600 tonnes @
10.5 g/t Au for 126,600 ounces. A technical study to determine
mineability of these deposits was commenced in Q4 2017. We continue
to believe that 2Moz is a resource target for the Liranda Corridor
Project which we plan to continue drill testing for in 2018.
In 2017 testing for further potential shoots within 5km along
strike from existing resources at Isulu and Bushiangala was
undertaken. At Shigokho and Shibuname Prospects 7 holes were
completed for 2924m. Best results
were from Shibuname included LCD0181 6.6m @ 3.12 g/t Au from 200.4m and 3m @
4.71 g/t Au from 218m, LCD0183
0.6m @ 3.48 g/t Au from 400.9m. Although encouraging more detailed
structural work is required to understand the potential of these
prospects and if further drilling is warranted.
Lake Zone Camp
RC drilling on gold-in-soil anomalies at Barkalare and
Kitson-Kerebe Target areas was completed in Q3 2017 with 30 RC
holes for 3250m. Best intercept
included LZRC0088 (Barkalare) 4m @
5.43 g/t Au from 52m and LZRC0097
(Kerebe) 5m @ 3.09 g/t Au from
23m and 2m @ 10.05 g/t Au from 60m. In 2018, drill testing of these significant
intercepts along strike and down dip will be undertaken. In
addition further geological mapping and infill soil sampling across
untested soil anomalies within the Lake Zone is underway to bring
these targets to drill testing stage.
Burkina
Faso
During 2017 we continued to explore our properties in the highly
prospective Houndé Belt in southwest Burkina Faso. Acacia currently has four joint
ventures and an interest in over 2,700km2 of prospective
greenstone belt. Acacia manages all of the joint ventures.
Extensive drilling programmes, including diamond, reverse
circulation and air-core drilling, were completed in 2017 on the
projects. A component of the 2017 work programmes was to review the
structural architecture of our land holdings and complete a target
generation exercise using airborne aeromagnetic and radiometric
data and ground IP geophysical data where available. These target
generation layers are now being synthesised with our surface
geochemical data layers to develop priority drilling targets. To
date we have delineated more than 65 targets, most of them were
followed up by field mapping in Q4. This program was aimed to
produce additional geology data to update the target ranking and to
design 2018 exploration.
South Houndé Joint Venture (Sarama Resources Limited) – current
ownership 50%, next stage earn-in to 70% (end 2018)
At the South Houndé JV project we continued field-based
exploration activities focused both on resource extensions to the
Tankoro Resource area (MM and MC zones), the Tankoro Corridor
prospects (Tankoro SW, Guy, Phantom and Phantom East) and regional
targets (Ouangoro, Tyikoro, Poyo/Werienkera and Bini West). Acacia commenced management of the
South Houndé JV as of 1st January
2017. During 2017 a total of 34,165 metres AC, 3,051 metres
of RC and 6,664 metres of diamond core were drilled. Mapping and
surface sampling was conducted on the regional prospects.
Field mapping and sampling focused on the best targets on the
Tankoro Corridor and on regional prospects. The ranking of the
targets has been updated and an exploration programme was designed
for 2018.
The exploration budget for the South Houndé project in 2018 is
US$3.8 million, comprising 7,000
metres of diamond core drilling, 8,000 metres of reverse
circulation drilling, and 32,000 metres of aircore drilling. A
resource update is planned for Q1 2018. Additionally mapping, soil
sampling and pole-dipole gradient array induced polarisation
geophysical surveys will be carried-out. The aim of this programme
is to extend current resource on the Tankoro corridor and to assess
the potential of the regional targets to deliver a new large-scale
gold deposit, or at a minimum several satellite ore bodies, capable
of positively impacting the quality, size and economics of the
global resources on the Project.
Tankoro - MM and MC Zones
During 2017 we continued a programme of drilling to test the
down-plunge extensions of higher grade gold mineralisation related
interpreted cross structures at the MM and MC Zones within the
Tankoro resource. A “results based” phased strategy has been
adopted “cycling” the rig between the Chewbacca, Yoda, Anakin and
Jabba zones within the MM and MC parallel mineralised zones.
All holes drilled to date have intersected the targeted porphyries
and cross structures, however, in most cases the interpreted
high-grade shoots are either of lower grade, or of shorter strike
extent than expected. The best potential at this stage appears to
be depth extensions on the MC Zone where drilling has identified
multiple mineralised porphyries and gold mineralisation in the
surrounding intercalated sediments.
Better results from MM and MC Zone included:
- FRC1070 - 11.35m @ 3.50g/t Au
from 397.5m including 6.5m @ 5.02g/t Au
- FRC1075 - 6.86m @ 6.83g/t Au from
173.15m including 2m @ 18.8g/t Au, and 3.35m @ 8.17g/t Au from 236.5m
- FRC1076 - 3.2m @ 22.5g/t Au from
231m,
- FRC1083A - 3.5m @ 3.79g/t Au from
406.5m (including 1m @ 8.75g/t Au), 1.85m @ 8.03g/t Au from 429.85m and 1.05m @
5.19g/t Au from 504m;
- FRC1076 - 6m @ 11.9g/t Au from
231m, 6.7m @ 3.80g/t Au from 240.8m (including 4m @ 6.12g/t Au)
- Phantom East - FRC1081 - 1.85m @
6.83g/t Au from 173.65m;
- Phantom East - FRC1053RE1 - 5.5m
@ 4.88g/t Au from 120m and
9m @ 4.85g/t Au from 129.5m,
- Phantom - FRC1088 - 2.45m @
2.42g/t Au from 145.4m,
- Phantom West - FRC1091 - 4.25m @
2.12g/t Au from 248.45m.
The geology model for the Tankoro resource has been updated in
Q4 2017. Early in 2018 a mineral resource estimation update is
expected to be completed along with additional metallurgic test
work. 2018’s drilling programme across the resource area, will
follow-up on the most prospective deep high-grade shoots, locate
repetitions of high grade shoots by in-filling existing drill
fences and test partially tested geophysics trends.
At Djimbake (south-western extension of the Tankoro resource
area) detailed geology and regolith mapping, associated with
rock-chip and termite mound sampling, was carried-out to assist
with the interpretation of the soil and recent drilling data. The
2018 programme will consist of follow-up aircore and reverse
circulation drilling to test the continuity of the mineralisation
along strike and at depth.
On the Ben potential new mineralised trend, located West of the
resource area, detailed mapping and rock-chip and termite mound
sampling showed the presence of significant hydrothermal alteration
associated with strong foliation. The 2018 programme will consist
of gradient array induced polarisation geophysical surveys,
additional soil sampling and following aircore drilling.
Ouangoro Anomaly
Aircore drilling commenced at the beginning of February on the
Ouangoro Anomaly with regional traverses across a 15 kilometre x 4
kilometre zone of semi-continuous gold-in-soil geochemical
anomalism along an interpreted NNE-trending linear geophysical
anomaly being drilled. Encouraging results have been returned from
all traverses but so far no economic grade has been
encountered.
Gold mineralisation and anomalism in drill chips, and observed
in artisanal workings, is typically associated with quartz veins in
sheared siltstone and sandstone units intruded by interpreted
quartz-feldspar porphyries, with fresher drill chips show carbonate
and silica-sericite alteration. Q4 2017 field activity mostly
focused on the 5km long Yankadi zone which represents the best
continuity of gold mineralisation and hydrothermal alteration along
the corridor.
Detailed geology and regolith mapping, associated with rock-chip
and termite mound sampling, confirmed the presence of strong
hydrothermal alteration, prospective cross-cutting structures and
significant artisanal mining workings. The 2018 programme will
consist of gradient array induced polarisation geophysical surveys,
aircore, reverse circulation and diamond drilling. The aim of the
programme is to confirm the continuity of the mineralisation.
Tankoro Southwest Extension
AC drilling was completed across multiple IP-geophysical and
gold-soil geochemical targets on the southwest extensions of the
Tankoro resource trend, known as the Djimbake area. The drilling
was following up anomalous AC drill results from 2016, testing the
southern extension of the Kenobi Trend, and testing for new
mineralised zones. Assay results were encouraging and included:
|
10m @ 1.73g/t Au |
|
4m @ 1.17g/t Au |
|
8m @ 4.25g/t Au |
|
6m @ 1.99g/t Au |
Gold anomalism in the AC drilling occurs in weathered and
altered sediments and porphyritic intrusive rocks with observed
alteration being carbonate, sericite and kaolinite; minor quartz
veining was also observed co-incident with some better zones of
gold anomalism. Planned follow-up drilling includes infill
and step-out AC traverses as well as some RC and diamond core
drilling to determine the significance of the shallow oxide gold
mineralisation and orientation/controls in fresh rock.
Central Houndé Joint Venture – current ownership 51%, potential
to earn 80%
Surface geochemical sampling undertaken has identified several
very encouraging zones of gold anomalism coincident with the
interpreted NE-trending Legue-Bongui structural corridor, including
an 8km x 2km anomalous gold zone. Additional interpretative work
has identified 35 targets associated with mapped alteration,
artisanal sites, mineralised rock chips and/or pathfinder
geochemistry warranting follow-up. During mapping a number of
west-north west trending mineralised structures were identified in
the Legue NW Corridor, and rock chips taken along these structures
returned a number of significant results. In total 21 of 49 rock
chip samples returned assays >0.1g/t up to 77.4g/t gold,
including assays of 5.95g/t, 19.1g/t, 28.1g/t, 62.8g/t and 77.4g/t.
The anomalous rock chip samples are associated with sheared mafic
volcanic rocks and boudinaged quartz vein zones.
Reverse circulation drilling was completed in the Legué-Bongui
Corridor to follow-up best results from previous drilling. 21 RC
holes were drilled for an aggregate of 2,797 metres. Best results
are:
- CHRC00050- 6m @ 0.57g/t Au from
80m, including 2m @ 1.19g/t Au; 2m
@ 1.83 g/t Au from 95m and
2m from 1.83g/t Au, including
1m @ 2.47g/t Au (ended in
mineralisation)
- CHRC00051- 7m @ 0,97g/t Au from
144m, including 3m @ 1.88g/t Au
- CHRC00052- 12m @ 1.40 g/t Au from
59 m, including 3m @ 2.60g/t Au from 66m and 1m @
4.03g/t from 67m and 13m @ 0.69g/t Au from 87m including 7m @
1g/t Au from 82m
- CHRC00054- 16m @ 0.51g/t Au from
61m including 5m @ 1.01g/t Au from 77m
- CHRC00056- 1m @ 1.58g/t Au from
7m.
The exploration programme for the Central Houndé project in 2018
comprises 11,500 metres of aircore drilling. Elements of the
drilling will be converted to reverse circulation drilling if the
regolith profile is stripped. Additional geology and regolith
mapping, soil sampling and gradient array induced polarisation
geophysical surveys are also comprised in the plan. The aim of the
programme is to advance targets to drill testing phase
(Légué-Bongui Corridor and Ouéré) and to delineate new exploration
targets.
Pinarello & Konkolikan Joint Venture (Canyon Resources
Limited)
During 2017 Acacia has earned 75% equity in the project and we
have therefore entered the contributory/dilution phase of the JV
agreement. Canyon Resources, our joint venture partner has elected
to dilute, and the current programmes will increase Acacia’s equity
to approximately 89%.
Surface geochemical sampling undertaken over the past 2 years
has identified several very encouraging zones of gold anomalism
coincident with the interpreted structural corridors, magnetic
features and surface IP geophysical anomalies. During the quarter
we completed a structural targeting exercise, reviewed the surface
gold anomalies from soil sampling, and undertook multi-element
geochemical analysis, using a portable XRF, of all samples from the
regional soil sampling programmes. As a result of this targeting
exercise we delineated 28 targets across the Pinarello project
area, and we commenced field validation, geological mapping and
further surface sampling programmes on priority target areas.
A total of 1,073 soil samples, 23,089 metres of aircore drilling
and 6,401 metres of RC drilling have been completed during 2017.
Results from aircore drilling along the Tangalobe and Tankoro
Corridor South is considered positive with better results of:
- 3m @ 0.77g/t
- 3m @ 0.72g/t Au
- 4m @ 1.64g/t Au
- 2m @ 6.0g/t Au
- 6.0m @ 1.18 g/t Au
- 8m @ 0.52g/t Au
Mineralisation is mostly associated with quartz veins, oxidised
sulphides and haematite.
Results from RC drilling were mixed with broad zones of gold
anomalism and narrow higher grade zones intersected at the Gaghny
Prospect whilst hole PIRC0039 on the northern Pinarello licence
following up the projected extension of the Tankoro Trend
intersected 6m @ 11.1g/t Au from
28m, including 2m @ 32.4g/t Au from 28m. An infill soil sampling program was
completed in Q4 on the Niodera license. A total of 1,252 samples
were collected. Last results are still awaited. Processing and
interpretation of the results will be done early next year.
The exploration plan for the Pinarello & Konkolikan project
in 2018 comprises 30,000 metres of aircore drilling. Part of the
drilling will be converted to reverse circulation drilling if the
regolith profile is stripped. The aim of the program is to push
more advance targets to target testing phase (Tankoro Corridor
South, Tangolobe and Gagnhy) and to delineate new exploration
targets.
Frontier JV (Metallor SA) – earning
100% through option payments
Regional regolith and geological mapping has been completed for
both licences (Badoura and Canra). A regional 800m x 400m
reconnaissance BLEG soil sampling programme, combined with termite
mound, rock chip and quartz lag sampling programmes has been
completed. This work has identified a number of significant large
scale gold-in-soil anomalies (soils up to 3g/t Au). A 200m x 200m infill
commenced but has been completed. A total of 6,035 soil, 44 rock
chip and 1,043 termite samples were collected during. In addition
to this a detailed structural magnetic interpretation and targeting
exercise was done. This interpretation integrated geological and
regolith mapping, Landsat, Aster and recently acquired high
resolution airborne magnetic and radiometric data. A number of high
quality targets have been selected for reconnaissance Aircore
drilling. An infill soil sampling program was completed in Q4 on
the Badoura license. A total of 1,013 samples were collected.
Processing and interpretation of the results will be done Q1,
2018.
The exploration budget for the Frontier project in 2018
comprises 6,000 metres of aircore drilling. Part of the drilling
will be converted to reverse circulation drilling if the regolith
profile is stripped. The aim of the programme is to delineate new
exploration targets.
Mali
In Mali we continued to
delineate surface gold-in-soil anomalies, already defined in late
2016, through mapping and surface IP geophysical surveys, and
commenced drilling programmes on the resultant targets. At the same
time, we continued to build our land position in the Senegal-Mali
Shear Zone (SMSZ) with a the grant of a further two land packages,
one under joint venture (Bou Bou) and the other 100% Acacia
(Gourbassi), Acacia now holds 5 exploration permits covering
191km2 on the SMSZ.
Tintinba - Bane Project – earning 95%
through option payments
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 year, a
ground-based gradient array induced polarisation geophysical survey
was completed (31 line km) and interpreted. Results from IP, soils,
drilling and mapped and interpreted geology have been used to
refine existing and define new targets for drill testing. At least
25 targets with co-incident IP chargeability, resistivity, and
surface gold-in-soil anomalism have been identified. RC
drilling commenced in mid-March 2017
aimed at testing around 18 targets in total with single drill
fences to test for gold mineralisation and to understand the
geology and alteration of each target in order to rank these
targets moving forward. RC drilling has returned positive results,
from 8 of 13 gold anomalies, including:
- 4m @ 18.7g/t Au
- 4m @ 5.62g/t Au
- 13m @ 1.11g/t Au
- 15m @ 0.50g/t Au
- 13m @ 0.50g/t Au
- 7m @ 1.01g/t Au
Given the discovery history of several >3Moz deposits in the
SMSZ, these results and the associated alteration on essentially
single RC fences, across large-scale gold-in-soil anomalies can be
considered very significant and warrant follow-up drilling
Reverse circulation drilling continued on selected targets in Q4
2017 with 42 holes for 4,987 meters. Drilling started on
November 26th and ended on
January 5th. The aim of
the drilling was to follow-up best mineralised intersections from
H1 drilling (Zadie and Manjro targets) and to delineate new targets
(Karité, Tribala and Sounsou). Best results are below with parts of
the assays still outstanding:
- 2m @ 2.14g/t Au
- 4m @ 1.44g/t Au
- 3m @ 0.95g/t Au
- 1m @ 5.51g/t Au
- 1m @ 5.51g/t Au
Portable XRF analysis of soil and drilling samples was completed
in Q4 2017. The interpretation of the results showed that gold
anomalies sit on or close to different “lineaments” (regional
trends, splays and possibly conjugate shears). The exploration
budget for the Tintinba - Bane project in 2018 comprises
1,500m of diamond drilling and
10,000m of reverse circulation
drilling. The program will be revised when all results from the Q4
2017 drilling is received and interpreted. The aim of the programme
is to push the best targets (Manjor, Zadie) to advanced exploration
stage and to continue testing other targets (Néré, Goni, Karité,
Tribala, Sounsou and Bouyagui).
Bourdala JV – earning 100% through
option payments
The Bourdala JV is a joint venture with a local company over the
Bou Bou licence located approximately 15km 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. Acacia can
earn up to 100% of the project through a series of staged payments
over a period of 36 months.
During 2017, six RC holes for 800 metres were completed across
the Bou Bou Artisanal Prospect on the Bourdala JV licence. These
returned anomalous results including: BORC005: 64m @ 0.23g/t from 10m, BORC004: 26m @
0.31g/t from 72m and 26m @ 0.58g/t from 104m. These results are encouraging given that
the results occur in consecutive holes on the drill traverse and
define a 50 metre wide zone of gold anomalism, within a 2km long
artisanal site.
The exploration plan for the Bourdala JV in 2018 comprises
1,200m of reverse circulation
drilling, 1,500m of air-core drilling
and 2,000 soil samples. The aim of the programme is to follow-up
the mineralised intersects from H1 drilling and to generate new
targets.
Gourbassi Est – 100% Acacia (ABD
Exploration Mali SARL)
During H1 2017, the Gourbassi Est convention was signed and
arête for the licence was received. The licence is located
immediately west of the Tintinba/Bane Project in the central
Senegal Mali Shear Zone 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. The programme for H2 2017 was to review
the historic data and complete mapping and surface sampling
programmes.
The exploration plan for the Gourbassi project in 2018 comprises
1,500m of air-core drilling and 3,000
soil samples. The aim of the programme is to generate exploration
targets.
Tanzania
Nyanzaga Joint Venture
During the period, OreCorp Limited published the results of the
Pre-Feasibility Study (“PFS”) on the Nyanzaga Project. The PFS, led
by Lycopodium Minerals Pty Ltd of Perth, Western
Australia, delivered an optimal development scenario of a
4Mtpa concurrent open pit (“OP”) and underground (“UG”) operation
for pre-production capital costs estimate of US$287 million, which includes a US$33 million contingency. The concurrent mining
schedule significantly reduced the low grade stockpiling scenario
considered in the Scoping Study and increased the OP contained
ounces and life of mine (“LOM”) average mineralised material grade
processed from 1.9 g/t gold in the Scoping Study to 2.0 g/t (+5%).
Based on the PFS, the Project is expected to deliver an average
gold production of 213koz per annum over a 12 year LOM, peaking at
249koz in Year 3 and totalling approximately 2.56Moz of gold
produced over the LOM. The AISC and AIC are estimated to be
US$838/oz and US$858/oz respectively over the LOM (excluding
initial capital expenditure). Acacia and OreCorp have agreed the
scope of the Definitive Feasibility Study (“DFS”) and this
commenced in the Q2 2017.
OreCorp and Acacia continue to review and seek advice on the
impact of the new legislation in Tanzania on the Nyanzaga Project. OreCorp has
published an analysis of their preliminary view of the impact of
the legislation which can be found on their website
(www.orecorp.com.au) and indicates that the legislation may
potentially have an adverse effect on the Nyanzaga Project. As a
result we have recorded an impairment charge of US$12 million for the Nyanzaga Project to reflect
the current estimate for the potential impact of the new mining
laws on the carrying value of the project, which now stands at
US$34 million.
Financial Review
The impact of the gold/copper concentrate export ban is evident
in our financial performance, and most notably in cash flow
generation. However, in an effort to minimising the impact, we have
further increased our focus on cost control, cash flow management
and capital allocation. The key aspects of our financial
performance for 2017 is summarised below, and should be read in
conjunction with the consolidated condensed financial
information:
- Revenue of US$751.5 million was
US$302.0 million lower than 2016
driven by the 27% decrease in sales volumes mainly as a result of
our inability to sell gold/copper concentrate which deferred
approximately US$264.0 million in
gross revenue and reduced production at Bulyanhulu due to the
transition to reduced operations in Q4 2017. This was partially
offset by approximately US$11.3
million due to the higher gold price compared to 2016.
- Cash costs decreased to US$587
per ounce sold in 2017 from US$640
per ounce sold in 2016 despite the lower production base, lower
cash costs were driven by lower G&A costs, lower consumable and
maintenance costs, lower sales related costs, lower fuel costs,
lower external services costs, higher realised gains on copper
hedges and lower labour costs, partly offset by the lower
production base, lower co-product revenue and lower capitalisation
of development costs.
- AISC of US$875 per ounce sold was
9% lower than in 2016 (US$958 per
ounce sold), mainly due to lower capitalised development cost,
lower sustaining capital expenditure, the share based payment
credit driven by the decrease in the Acacia share price and lower
cash costs, partly offset by the impact of lower sales volumes on
individual cost items.
- As a result of the above and in combination with higher
corporate administration charges driven by higher legal costs due
to the concentrate export ban and outstanding tax matters, EBITDA
decreased by 38% to US$257.2
million.
- Gross impairment charges of US$850.2
million (net US$644.3 million)
following the carrying value review conducted in light of changes
in the operating environment in Tanzania, and by reference to the key terms of
the Framework announcements made by Barrick and by the GoT in
October 2017. This is made up of
US$838.0 million relating to
Bulyanhulu and US$12.2 million
relating to Nyanzaga.
- Tax credit of US$2.3 million
compared to the prior year expense of US$147.1 million. The current year charge is
driven by additional provisions raised for uncertain tax positions
of US$172 million based on estimates
of the impact of a comprehensive settlement reflecting the key
terms of the Framework announcements by Barrick and the GoT, offset
by the deferred tax impact relating to impairment charges noted
above of US$205.9 million;
- As a result of the above, the net loss amounted to US$707.4 million, compared to net income in 2016
of US$94.4 million.
- Adjusted net earnings of US$146.2
million were US$14.8 million
lower than 2016. Adjusted earnings per share amounted to US35.7
cents, down from US39.2 cents in 2016.
- Operational cash outflows of US$23.0
million compared to US$318.0
million of inflows in 2016, primarily as a result of lower
revenue as discussed above, unfavourable working capital outflows
due to a build-up of gold inventory and supplies, an increase in
the indirect taxes receivable, and payments of US$37.9 million relating to provisional 2017 and
final 2016 corporate tax.
The following review provides a detailed analysis of our
consolidated results for the 12 months ended 31 December 2017 and the main factors affecting
financial performance. It should be read in conjunction with the
unaudited consolidated financial information and accompanying notes
on pages 38 to 64, which have been prepared in accordance with
International Financial Reporting Standards as adopted for use in
the European Union (“IFRS”).
Revenue
Revenue for 2017 of US$751.5
million was US$302.0 million
lower than 2016 due to a 27% decrease in gold sales volumes from
Bulyanhulu and Buzwagi (223koz), primarily driven by the ban on
export of mineral concentrates from early March 2017, and reduced production at Bulyanhulu
due to the transition to reduced operations in Q4 2017, partly
offset by a 2% increase in the average net realised gold price from
US$1,240 per ounce sold in 2016 to
US$1,260/oz in 2017.
The net realised gold price for the year of US$1,260/oz was US$3/oz higher than the average market price of
US$1,257/oz due to the impact of gold
price protection measures in the form of put options entered into
in September 2017 of US$2.7 million. These options had a strike price
of US$1,300 with full exposure to
gold prices above that level.
Included in total revenue is co-product revenue of US$7.2 million for the 2017 year, 82% lower than
the prior period (US$39.1 million).
This was as a result of the lack of concentrate sales from
March 2017 as a result of the export
ban relating to gold/copper concentrate. The 2017 average realised
copper price of US$2.98 per pound
compared favourably to that of 2016 (US$2.21 per pound), and was mainly driven by the
higher market price for copper. The benefit of a higher copper
price is however not fully reflected in 2017 revenues due to the
inability to sell copper.
The impact of the ban during the year has resulted in a build-up
of approximately 185,800 ounces of gold contained in unsold
concentrate. In addition, we have approximately 12.1 million pounds
of copper and 158,900 ounces of silver contained in unsold
concentrate. If these had been sold, gross revenue and cash flow
would have increased by approximately US$264.0 million and US$240.0 million respectively based on average
spot prices in the year.
Cost of sales
Cost of sales was US$458.4 million
for 2017, representing a decrease of 37% on the prior year period
(US$727.1 million). The key aspects
impacting the cost of sales for the year include a 37% reduction in
direct mining costs, primarily driven by higher capitalised mining
costs including a credit of approximately US$94.2 million relating to a build-up of
finished gold ounces, combined with lower activity at Bulyanhulu
due to the move to reduced operations, lower depreciation and
amortisation costs as a result of the lower production base at
Bulyanhulu and lower sales related cost due to lower sales volumes,
partly offset by higher realised gains on gold put options.
The table below provides a breakdown of cost of sales:
(US$'000) |
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Cost of Sales |
|
|
|
|
|
Direct
mining costs1 |
70,773 |
132,937 |
|
299,591 |
479,022 |
Third
party smelting and refining fees |
1,439 |
6,360 |
|
9,675 |
25,588 |
Realised losses on economic hedges |
128 |
1,004 |
|
743 |
9,619 |
Realised (gains)/losses on gold hedges |
(2,693) |
487 |
|
(2,693) |
1,818 |
Royalty expense |
14,035 |
11,808 |
|
44,930 |
47,237 |
Depreciation and amortisation* |
25,260 |
43,718 |
|
106,201 |
163,796 |
Total |
108,942 |
196,314 |
|
458,447 |
727,080 |
|
|
1 Net of Bulyanhulu
reduced operations cost (ROP).
* Depreciation and amortisation
includes debits relating to the depreciation component of the cost
of the draw down in the quarter of US$0.1
million for Q4 2017 (Q4 2016: US$3.0
million) and credits due to the cost build-up in inventory
US$26.9 million for 2017 (2016:
US$2.6 million).
A detailed breakdown of direct mining expenses is shown in the
table below:
(US$'000) |
|
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
Direct mining costs |
|
|
|
|
|
|
Labour |
|
14,067 |
24,006 |
|
83,238 |
90,013 |
Energy
and fuel |
|
15,454 |
24,082 |
|
80,461 |
89,757 |
Consumables |
|
15,855 |
26,248 |
|
85,698 |
105,152 |
Maintenance |
|
16,576 |
30,807 |
|
92,603 |
111,451 |
Contracted services |
|
24,788 |
37,226 |
|
124,592 |
133,734 |
General administration costs |
|
15,620 |
23,541 |
|
77,546 |
86,761 |
Gross direct mining costs |
|
102,360 |
165,910 |
|
544,138 |
616,868 |
Bulyanhulu Reduced Operations cost1 |
|
(13,687) |
- |
|
(14,227) |
- |
Capitalised mining costs |
|
(17,900) |
(32,973) |
|
(230,320) |
(137,846) |
Total direct mining costs |
|
70,773 |
132,937 |
|
299,591 |
479,022 |
1 Includes non-sustaining costs
relating to Bulyanhulu reduced operations cost
(ROP).
Gross direct mining costs of US$544.1
million for 2017 were 12% lower than 2016 (US$616.9 million). The overall decrease was
driven by the following:
- A 11% decrease in G&A costs driven by lower stock write
downs, lower logistic and warehousing cost and lower camp costs at
Bulyanhulu as well as lower aviation costs at all sites;
- A 19% decrease in consumable costs mainly driven by lower usage
at Bulyanhulu and improved consumable unit costing and usage
optimisation at other sites;
- A 17% decrease in maintenance costs mainly at Bulyanhulu due to
the transition to reduced operations in combination with
initiatives to improve planned maintenance activities;
- A 10% decrease in energy and fuel costs mainly driven by lower
usage at Bulyanhulu and improved supply of Tanesco;
- A 8% decrease in labour costs mainly at Bulyanhulu due to a
decrease in headcounts as part of the transitioning to reduced
operations
- A 7% decrease in contracted services mainly at Bulyanhulu due
to the transition to reduced operations resulting in the halting of
underground mining and development activities.
Capitalised direct mining costs, consisting of capitalised
development costs and investment in inventory is made up as
follows:
(US$'000) |
|
|
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
|
|
2017 |
2016 |
|
2017 |
2016 |
Capitalised direct mining costs |
|
|
|
|
|
|
|
Capitalised development costs |
|
|
(12,212) |
(33,704) |
|
(89,388) |
(119,905) |
Investment in inventory |
|
|
(5,688) |
731 |
|
(140,932) |
(17,941) |
Total capitalised direct mining costs |
|
|
(17,900) |
(32,973) |
|
(230,320) |
(137,846) |
Capitalised direct mining costs were 67% higher than 2016,
primarily driven by a build-up of gold ounces in concentrate at
Bulyanhulu and Buzwagi resulting in an investment in inventory of
US$140.9 million. The decrease in
capitalised development cost mainly relate to halting of
development activities at Bulyanhulu following the transition to
reduced operations, and at North Mara, due to a decrease in
capitalised stripping relating to the Nyabirama Cut 4 cutback and
lower underground waste development.
Central costs
Total central costs amounted to US$18.7
million for 2017, a 64% decrease on 2016 (US$51.8 million) mainly driven by a non-cash
share based payment revaluation credit as a result of the lower
share price and share price performance compared to 2016,
specifically when compared to our peers and the global mining
index, impacting on the valuation of future share-based payment
liabilities to employees. Acacia’s share price decreased by
approximately 47% compared to December
2016. This was partly offset by a 23% increase in corporate
administration costs as a result of higher legal costs amounting to
approximately US$10 million relating
to the concentrate export ban and other matters.
(US$'000) |
|
|
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
|
|
2017 |
2016 |
|
2017 |
2016 |
Corporate administration |
|
|
7,613 |
6,218 |
|
26,913 |
21,895 |
Share-based payments |
|
|
186 |
(9,795) |
|
(8,236) |
29,929 |
Total central costs |
|
|
7,799 |
(3,575) |
|
18,677 |
51,824 |
Exploration and evaluation costs
Exploration and evaluation costs of US$24.8 million were incurred in 2017, marginally
higher than the US$24.0 million spent
in 2016. The key focus areas for the year were greenfield
exploration programmes in West
Kenya amounting to US$12.9
million and greenfield exploration programmes in
West Africa amounting to
US$10.3 million.
Corporate social responsibility
expenses
Corporate social responsibility costs incurred in 2017 amounted
to US$8.2 million compared to the
prior year of US$10.7 million.
Corporate social responsibility overheads and central initiatives
in 2017 amounted to US$4.6 million
and were in line with 2016. In addition, general community projects
funded from the Acacia Maendeleo Fund amounted to US$3.6 million, which was US$2.5 million lower than in 2016, driven by the
timing of projects and the number of qualifying initiatives
identified.
Impairment charges
Acacia has identified a number of potential triggers for
impairment testing of the carrying value of its assets, including
but not limited to, the challenges experienced in the operating
environment in Tanzania, the
announcement of new legislation by the GoT in respect of the
natural resources sector and Acacia’s decision to reduce operations
at Bulyanhulu, As a result, Acacia has undertaken a carrying value
review of the Group’s affected Cash Generating Units (CGUs).
Acacia considers that in accordance with applicable accounting
standards, carrying values for the CGUs should now be calculated by
reference to the key terms of the Framework announcements made by
Barrick and by the GoT in October
2017 and discussed above, with additional discounting to
reflect the uncertainty around the final terms of any comprehensive
settlement that might be reached.
The review demonstrates a potential reduction in value at all
three assets, but Buzwagi and North Mara have sufficient headroom
above their current carrying values. At Bulyanhulu, however, the
impact of the changes was greater, due to the long life of the mine
and the delay to a return to positive cash generation including due
to the move to reduced operations. The review resulted in a net
impairment of US$632 million for
Bulyanhulu, which includes pre-tax write-downs of US$122 million for goodwill and US$30 million for supplies inventory (2016: no
impairment). In addition we have recorded an impairment charge of
US$12 million for the Nyanzaga
Project to reflect the impact of the new Mining Laws on the
carrying value of the project, which now stands at US$34 million. On a gross basis, and before
taking into account the impact of a reduced asset base on deferred
tax liabilities, the total impairment charge amounted to
US$850 million.
Other charges
Other charges in 2017 amounted to US$90.4
million, compared to an income of US$11.6 million in 2016. The main contributors
include Bulyanhulu non sustaining costs (US$13.9 million), Bulyanhulu stock obsolescence
(US$7.5 million) and Bulyanhulu
contractor exit and demobilisation cost (US$4.9 million). Retrenchment costs of
US$25.1 million mainly relating to
Bulyanhulu reduced operations (US$16.9
million), discounting of indirect taxes US$13.3 million, legal costs of US$14.4 million mainly relating to the
concentrate export ban and other matters, once-off legal
settlements of US$5.0 million
relating to the MDM settlement, foreign exchange losses of
US$2.7 million and project
development costs of US$1.5 million.
The charges were partly offset by income of US$1.8 million generated through the sale of a
mineral royalty previously held by Acacia and the Houndé royalty
income received of US$1.6
million.
All costs not classified as ongoing operating costs were
allocated to the new cost category called ‘reduced operations
costs’ (ROP) and will be included in other charges, and do not form
part of AISC for Bulyanhulu or the group (US$ 24.8 million). The costs reallocated to
reduced operations include all UG mining costs and processing costs
as well as site overheads such as shift transportation, health and
safety and environmental costs, camp cost and security costs were
systematically reallocated based on headcounts.
Finance expense and income
Finance expense of US$12.4 million
for 2017 was 12% higher than 2016 (US$11.0
million). The key components were borrowing costs relating
to the Bulyanhulu CIL facility (US$2.9
million) which were lower than the prior year due to a lower
outstanding facility following repayments, higher accretion
expenses of US$3.4 million relating
to the discounting of the environmental reclamation liability,
US$2.3 million relating to the
servicing of the US$150 million
undrawn revolving credit facility and the US$2.1 million premium paid on gold put options.
Other costs include bank charges and interest on finance leases
US$0.2 million.
Finance income relates predominantly to interest charged on
non-current receivables and interest received on money market
funds. Refer to note 9 of the condensed financial information for
details.
Taxation matters
The total income tax credit of US$2.3
million is lower than the prior year tax expense of
US$147.1 million. The current year
tax credit comprised of deferred tax credits of US$209.9 million (2016: US$55.9 million) driven primarily by the tax
impact of the impairment charge (US$205.9
million) which reflects movements in temporary differences,
partly offset by current tax charges of US$207.7 million (2016: US$91.2 million) predominantly made up of the
additional tax provisions raised of US$172
million for uncertain tax positions for the operating
companies based on estimates of the impact of a comprehensive
settlement reflecting the key terms of the Framework announcements
by Barrick and the GoT and current year income tax for North Mara
of US$35.7 million driven by year to
date profitability. This brings total provisions for Acacia’s
uncertain tax positions to US$300
million. The tax expense for 2016 of US$147.1 million included US$69.9 million relating to uncertain tax
positions raised for historical tax disputes. The effective tax
rate in 2017 amounted to 0.4% compared to 61% in 2016, as a result
of the above.
During 2017, we made provisional corporate tax payments of
US$34.6 million relating to North
Mara, as well as a US$3.3 million
final corporate tax payment relating to 2016 final tax assessments.
These provisional and final 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 2017 we
have also made a corporate tax deposit payment of US$9.5 million relating to an advance payment
relating to a dispute raised on claimed historical North Mara
taxes, which was paid in cash.
Net earnings and earnings per
share
As a result of the factors discussed above, the net loss for
2017 was US$707.4 million, against
the prior year earnings of US$94.9
million.
The loss per share for 2017 amounted to US172.5 cents, a
decrease of US195.7 cents from the prior year earnings per share of
US23.2 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 were US$146.2
million compared to US$161.0
million in 2016. Net earnings in the period as described
above have been adjusted for the impact of items such as impairment
charges, prior year tax provisions, discounting of indirect tax
receivables, restructuring costs, insurance proceeds, legal
settlements as well as Bulyanhulu reduced operations cost. Refer to
page 36 for reconciliation between net profit and adjusted net
earnings.
Adjusted earnings per share for 2017 amounted to US35.7 cents, a
decrease of US3.5 cents from 2016 adjusted earnings per share of
US39.2 cents.
Financial position
Acacia had cash and cash equivalents on hand of US$80.5 million as at 31
December 2017 (US$317.8
million as at 31 December
2016). 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 2017, the 4th and 5th repayment
amounting to US$28.4 million in total
was made. At 31 December 2017, the
outstanding capital balance is US$71.0
million (31 December 2016
US$99.4 million).
As at 31 December 2017 (and to
date), the existing revolving credit facility of US$150 million, which runs until November 2019, remained undrawn.
The net book value of property, plant and equipment decreased
from US$1.44 billion as at
31 December 2016 to US$0.77 billion as at 31
December 2017 as a result of an impairment charge booked in
2017 of US$686.4 million. The main
capital expenditure drivers have been explained above, and have
been offset by depreciation charges of US$126.0 million. Refer to note 13 to the
condensed financial information for further details.
The current portion of inventories increased from US$184.3 million as at 31
December 2017 to US$291.9
million as at 31 December
2017. This was due to an increase of US$124.7 million in finished goods, mainly
relating to gold in concentrate. Total gold ounces on hand of
192,290 ounces as at 31 December 2017
comprised 185,772 ounces of gold in unsold concentrate and 6,518
ounces of gold in doré.
Total indirect tax receivables increased from US$136.4 million as at 31
December 2016 to US$170.7
million as at 31 December
2017. The increase was mainly due to a build-up in VAT
receivable as no VAT refunds were received during 2017, with all
submitted VAT returns still the subject of ongoing audits by the
Tanzanian Revenue Authority. Our gross increase in receivables,
before the corporate tax prepayment offset, amounted to
approximately US$89.5 million. This
was partly offset by provisional and final corporate tax payments
of US$37.9 million, discounting of
indirect taxes of US$13.3 million and
revaluation losses with the net increase in receivables being
US$47.6 million.
The net deferred tax position was a liability of US$140.0 million as at 31
December 2016 compared to the asset of US$70.0 million as at 31
December 2017. This was mainly as a result of the
US$205.9 million tax effect of the
impairment charges.
Net assets decreased from US$1.86
billion as at 31 December 2016
to US$1.12 billion as at 31 December 2017. The decrease reflects the
current year loss of US$707.4 million
and the payment of the final 2016 dividend of US$34.4 million.
Cash flow generation and capital
management
Cash flow
(US$000) |
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Cash
(used in)/ generated from operating activities |
(1,503) |
60,933 |
|
(22,972) |
317,976 |
Cash
used in investing activities |
(13,411) |
(45,107) |
|
(151,711) |
(185,163) |
Cash
used in financing activities |
- |
- |
|
(62,785) |
(48,032) |
(Decrease)/ increase in cash |
(14,914) |
15,826 |
|
(237,468) |
84,781 |
Foreign exchange difference on cash |
106 |
(96) |
|
190 |
(258) |
Opening cash balance |
95,321 |
302,061 |
|
317,791 |
233,268 |
Closing cash balance |
80,513 |
317,791 |
|
80,513 |
317,791 |
Cash flow from operating activities was an outflow of
US$23.0 million for 2017, a decrease
of US$340.9 million from 2016
(US$318.0 million inflow). The
decrease relates to unfavourable working capital outflows of
US$313.0 million compared to
unfavourable outflows of US$58.5
million in 2016 combined with the impact of the inability to
export our concentrate on operating cash flow of approximately
US$233.0 million.
The working capital outflow relates to a net increase in total
inventories on hand of US$172.2
million driven by the inability to export concentrate, a
gross increase in indirect tax receivables of approximately
US$51.7 million, provisional
corporate tax paid of US$34.6 million
relating to North Mara and a final corporate tax payment relating
to North Mara’s 2016 assessed income tax of US$3.3 million. These provisional and final
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. Other items included
in the working capital outflows included a corporate tax deposit
relating to North Mara of US$9.5
million.
Cash flow used in investing activities was US$151.7 million for 2017, a decrease of 18% when
compared to 2016 (US$185.2 million),
driven by lower capitalised development at both North Mara and
Bulyanhulu and lower sustaining capital expenditure at Bulyanhulu
and North Mara.
A breakdown of total capital and other investing capital
activities for 2017 is provided below:
(US$’000) |
|
|
Year ended 31 December |
(Unaudited) |
|
|
2017 |
2016 |
|
|
|
|
|
Sustaining
capital |
|
|
(45,226) |
(51,291) |
Capitalised
development |
|
|
(100,609) |
(138,691) |
Expansionary
capital |
|
|
(11,573) |
(3,660) |
Total cash
capital |
|
|
(157,408) |
(193,643) |
Non-current asset
movement1 |
|
|
5,697 |
8,480 |
Cash used in
investing activities |
|
|
(151,711) |
(185,163) |
Capital expenditure
reconciliation: |
|
|
|
|
Total cash
capital |
|
|
157,408 |
193,643 |
Land purchases |
|
|
1,637 |
4,759 |
Movement in capital
accruals |
|
|
(9,669
) |
(2,504) |
Capital
expenditure |
|
|
149,376 |
195,898 |
Land purchases
classified as long term prepayments |
|
|
(1,637) |
(4,759) |
Non-cash
rehabilitation asset adjustment |
|
|
(9,087) |
21,955 |
Total capital
expenditure per segment note |
|
|
138,652 |
213,094 |
1 Non-current asset movements relates to the movement
in Tanzania government
receivables, other long term assets and the sale of a mineral
royalty.
Sustaining capital
Sustaining capital expenditure includes investment in fixed
equipment and mining infrastructure at Bulyanhulu (US$9.0 million) and at North Mara (US$13.7 million), investment in mobile equipment
and component change-outs at both North Mara and Bulyanhulu
(US$8.1 million) In addition;
US$1.6 million was spent on land
acquisitions primarily around the Nyabirama open pit. During the
year, capital accruals from December
2016 of US$10.0 million were
paid.
Capitalised development
Capitalised development includes Bulyanhulu capitalised
underground development costs (US$58.8
million), North Mara capitalised stripping costs
(US$45.4 million) and capitalised
underground development (US$15.7
million).
Expansionary capital
Expansionary capital expenditure consisted mainly of capitalised
expansion drilling at North Mara of US$10.3
million mainly relating to drilling performed as part of
Gokona resource and reserve development (US$6.7 million) as well as initial works on
Nyabirama underground studies (US$3.1
million) and US$1.2 million
relating to the Bulyanhulu optimisation study.
Non-cash capital
Non-cash capital was a negative US$9.1
million and consisted mainly of a decrease in capital
accruals (US$9.0 million) due to the
cancellation of open capital orders as part of transitioning
Bulyanhulu to reduced operations and reclamation asset adjustments
(US$9.1 million). The reclamation
adjustments were driven by an update in estimate around closure
related retrenchment costs, and a reduction in the US risk free
rates which drove a change in discount rates.
Cash flow used in financing activities for 2017 of
US$62.8 million, an increase of
US$14.8 million from US$48.0 million in 2016. The outflow relates to
payment of the final 2016 dividend of US$34.4 million and the payment of the
4th and 5th instalment of the borrowings
related to the Bulyanhulu CIL facility totalling US$28.4 million.
Dividend
Given the negative cash generation through 2017, and in line
with our dividend policy, no final dividend has been declared.
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
It also includes realised gains and losses on gold hedge
contracts reported as part of cost of sales.
Net average realised gold price per ounce sold have been
calculated as follow:
(US$000) |
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Gold
revenue |
188,607 |
253,957 |
|
744,294 |
1,014,468 |
Realised gold hedge gains (losses) |
2,693 |
(487) |
|
2,693 |
(1,818) |
Net
gold revenue |
191,300 |
253,470 |
|
746,987 |
1,012,651 |
Gold
sold (ounces) |
147,636 |
209,292 |
|
592,861 |
816,743 |
Net
average realised gold price (US$/ounce) |
1,296 |
1,211 |
|
1,260 |
1,240 |
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.
(US$'000) |
|
|
Three months ended 31 December |
|
Year ended 31 December |
(Unaudited) |
|
|
2017 |
2016 |
|
2017 |
2016 |
Total cost of sales |
|
|
108,942 |
196,314 |
|
458,447 |
727,080 |
Deduct: depreciation and amortisation* |
|
|
(25,260) |
(43,718) |
|
(106,201) |
(163,796) |
Deduct: realised losses on gold hedges |
|
|
2,693 |
(487) |
|
2,693 |
(1,818) |
Deduct: Co-product revenue |
|
|
(642) |
(9,932) |
|
(7,221) |
(39,063) |
Total cash cost |
|
|
85,733 |
142,177 |
|
347,718 |
522,403 |
|
|
|
|
|
|
|
|
Total
ounces sold |
|
|
147,636 |
209,292 |
|
592,861 |
816,743 |
Total
cash cost per ounce sold |
|
|
581 |
679 |
|
587 |
640 |
* Depreciation and amortisation includes the depreciation
component of the cost of inventory sold
All-in sustaining cost (AISC) is a non-IFRS financial
measure. The measure is in accordance with the World Gold Council’s
guidance issued in June 2013. It is
calculated by taking cash cost per ounce sold and adding corporate
administration costs, share-based payments, reclamation and
remediation costs for operating mines, corporate social
responsibility expenses, mine exploration and study costs, realised
gains and/or losses on operating hedges, capitalised stripping and
underground development costs and sustaining capital expenditure.
This is then divided by the total ounces sold. A reconciliation
between cash cost per ounce sold and AISC for the key business
segments is presented below:
(Unaudited) |
Three months ended 31 December 2017 |
|
(US$/oz sold) |
Bulyanhulu1 |
North
Mara |
Buzwagi |
Group* |
|
Cash
cost per ounce sold |
- |
587 |
535 |
581 |
|
Corporate administration |
- |
29 |
21 |
52 |
|
Share
based payments |
- |
- |
1 |
1 |
|
Rehabilitation |
- |
12 |
3 |
9 |
|
CSR
expenses |
- |
15 |
8 |
16 |
|
Capitalised development |
- |
186 |
- |
93 |
|
Sustaining capital |
- |
74 |
15 |
27 |
|
Total
AISC |
- |
903 |
583 |
779 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Three months ended 31 December 2016 |
(US$/oz sold) |
|
Bulyanhulu |
North
Mara |
Buzwagi |
Group* |
|
Cash
cost per ounce sold |
|
784 |
436 |
1,035 |
679 |
|
Corporate administration |
|
17 |
17 |
25 |
30 |
|
Share
based payments |
|
(21) |
(14) |
(20) |
(47) |
|
Rehabilitation |
|
8 |
9 |
2 |
7 |
|
CSR
expenses |
|
7 |
19 |
7 |
15 |
|
Capitalised development |
|
214 |
236 |
- |
181 |
|
Sustaining capital |
|
52 |
147 |
7 |
87 |
|
Total
AISC |
|
1,061 |
850 |
1,056 |
952 |
|
|
|
|
|
|
|
|
|
|
|
|
1 Cash cost per ounce sold and AISC
per ounce sold for the quarter are non-meaningful due to the impact
of negligible sales ounces on the costs relating to reprocessed
tailings.
* The group total includes a credit
of US$25/oz of unallocated corporate
related costs in Q4 2017, and a cost of US$14/oz in Q4 2016.
(Unaudited) |
Year ended 31 December 2017 |
|
|
(US$/oz sold) |
Bulyanhulu |
North
Mara |
Buzwagi |
Group* |
Cash
cost per ounce sold |
840 |
498 |
594 |
587 |
Corporate administration |
59 |
26 |
35 |
45 |
Share
based payments |
(6) |
(2) |
(2) |
(14) |
Rehabilitation |
20 |
11 |
5 |
11 |
CSR
expenses |
10 |
11 |
8 |
14 |
Capitalised development |
367 |
188 |
- |
170 |
Sustaining capital |
83 |
71 |
27 |
62 |
Total
AISC |
1,373 |
803 |
667 |
875 |
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
Year ended 31 December 2016 |
|
|
(US$/oz sold) |
Bulyanhulu |
North
Mara |
Buzwagi |
Group* |
Cash
cost per ounce sold |
722 |
410 |
1,031 |
640 |
Corporate administration |
21 |
21 |
26 |
27 |
Share
based payments |
2 |
2 |
3 |
37 |
Rehabilitation |
7 |
9 |
3 |
7 |
CSR
expenses |
6 |
15 |
10 |
13 |
Capitalised development |
226 |
201 |
- |
170 |
Sustaining capital |
74 |
75 |
22 |
64 |
Total
AISC |
1,058 |
733 |
1,095 |
958 |
|
|
|
|
|
|
|
|
* The group total includes a credit
of US$5/oz of unallocated corporate
related costs in 2017, and a cost of US$43/oz in 2016.
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 31 December |
|
Year ended 31 December |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Net
(loss)/profit for the period |
(785,975) |
48,285 |
|
(707,394) |
94,944 |
Plus
income tax (credit)/expense |
(47,835) |
11,399 |
|
(2,272) |
147,113 |
Plus
depreciation and amortisation |
25,260 |
43,718 |
|
106,201 |
163,796 |
Plus:
impairment charges1 |
850,182 |
- |
|
850,182 |
- |
Plus
finance expense |
3,971 |
2,644 |
|
12,407 |
11,047 |
Less
finance income |
(140) |
(365) |
|
(1,944) |
(1,512) |
EBITDA |
45,463 |
105,681 |
|
257,180 |
415,388 |
1 Refer note 7 in the financial statements
*Depreciation and amortisation
includes the depreciation component of the cost of inventory
sold.
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. EBITDA is adjusted for items (a) to (e) as contained
in the reconciliation to adjusted net earnings below.
EBIT is a non-IFRS financial measure and reflects EBITDA
adjusted for depreciation and amortisation and goodwill impairment
charges.
Adjusted net earnings is a non-IFRS financial measure. It
is calculated by excluding certain costs or credits relating to
non-routine transactions from net profit attributed to owners of
the parent. It includes other credit and charges that, individually
or in aggregate, if of a similar type, are of a nature or size that
requires explanation in order to provide additional insight into
the underlying business performance.
Adjusted net earnings and adjusted earnings per share have been
calculated as follows:
(US$000) |
Three months ended 31 December |
|
Year ended 31 December |
|
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Net
(loss)/earnings |
(785,975) |
48,285 |
|
(707,394) |
94,944 |
Adjusted for: |
|
|
|
|
|
Restructuring cost (a)2 |
4,874 |
3,995 |
|
23,577 |
7,689 |
Discounting of indirect taxes (b) |
13,276 |
(3,211) |
|
13,276 |
(9,719) |
One-off legal settlements (c) |
- |
- |
|
5,083 |
- |
Prior
year tax positions recognised1 |
- |
- |
|
- |
69,916 |
Reduced operational cost(d)3 |
4,000 |
- |
|
11,411 |
- |
Insurance settlements (e) |
- |
(3,455) |
|
- |
(3,455) |
Impairment charges/write-offs (f)4 |
850,182 |
- |
|
850,182 |
- |
Provision for uncertain tax positions(g)1 |
172,000 |
- |
|
172,000 |
- |
Tax
impact of the above |
(212,558) |
801 |
|
(221,917) |
1,646 |
Adjusted net earnings |
45,799 |
46,415 |
|
146,218 |
161,021 |
1 Includes a tax provision raised of US$172.0 million for uncertain tax positions,
based on an estimate of the impact of a comprehensive settlement
reflecting the key terms of the Framework announcements made by
Barrick and the GoT in October 2017.
For the 12 months ended 31 December
2016, US$69.9 million
represents a provision raised for the implied impact of an adverse
tax ruling made by the Tanzanian Court of Appeal with respect to
historical tax assessments of Bulyanhulu. As reported in Q1 2016,
the impact of the ruling was calculated for Bulyanhulu and
extrapolated to North Mara and Tulawaka as well and covers results
up to the end of 2015. On a site basis, US$35.1 million was raised for Bulyanhulu,
US$30.4 million for North Mara and
US$4.4 million for Tulawaka.
2 Restructuring costs mainly relate to Bulyanhulu
(US$16.9 million) as a result of the
transitioning to reduced operations and other sites (US$8.2 million).
3 Reduced operations costs not part of Bulyanhulu’s
AISC cost and includes stock obsolescence costs for 2017
(US$6 million) and contractor exit
costs (US$4.9 million).
4 Refer note 7 in the financial statements
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
For 2017 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 throughout the year. However, there have been
changes in certain risk profiles 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
the review, at the end of 2017 we viewed our principal risks 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 will be provided
as part of the 2017 Annual Report and Accounts.
Condensed Financial Information
Consolidated income statement
|
|
For the year ended
31 December |
For
the year ended
31 December |
|
|
(Unaudited) |
(Audited) |
(in
thousands of United States dollars) |
Notes |
2017 |
2016 |
|
|
|
|
|
|
|
|
Revenue |
5 |
751,515 |
1,053,532 |
Cost
of sales |
|
(458,447) |
(727,080) |
Gross profit |
|
293,068 |
326,452 |
Corporate administration |
|
(26,913) |
(21,895) |
Share-based payments |
|
8,236 |
(29,929) |
Exploration and evaluation costs |
6 |
(24,829) |
(24,020) |
Corporate social responsibility expenses |
|
(8,213) |
(10,665) |
Impairment charges |
7 |
(850,182) |
- |
Other
(charges)/income |
8 |
(90,370) |
11,649 |
(Loss)/Profit before net finance expense and taxation |
|
(699,203) |
251,592 |
Finance income |
9 |
1,944 |
1,512 |
Finance expense |
9 |
(12,407) |
(11,047) |
(Loss)/Profit before taxation |
|
(709,666) |
242,057 |
Tax
credit/(expense) |
10 |
2,272 |
(147,113) |
Net
(loss)/profit for the year |
|
(707,394) |
94,944 |
|
|
|
|
(Loss)/Earnings per
share: |
|
|
|
Basic
(loss)/earnings per share (cents) |
11 |
(172.5) |
23.2 |
Diluted (loss)/earnings per share (cents) |
11 |
(172.5) |
23.1 |
|
|
|
|
|
The notes on pages 43 to 63 are an integral part of this
financial information.
Consolidated statement of
comprehensive income
|
|
For the year ended
31 December |
For
the year ended
31 December |
|
|
(Unaudited) |
(Audited) |
(in
thousands of United States dollars) |
|
2017 |
2016 |
|
|
|
|
Net
(loss)/profit for the year |
|
(707,394) |
94,944 |
Other comprehensive income: |
|
|
|
Items that may be subsequently reclassified to profit or
loss: |
|
|
|
Changes in fair value of cash flow hedges |
|
108 |
7 |
Total comprehensive (expense)/income for the year |
|
(707,286) |
94,951 |
|
|
|
|
|
The notes on pages 43 to 63 are an integral part of this
financial information.
Consolidated balance sheet
|
|
As
at
31 December |
As
at
31 December |
|
|
(Unaudited) |
(Audited) |
(in
thousands of United States dollars) |
Notes |
2017 |
2016 |
ASSETS |
|
|
|
Non-current assets |
|
|
|
Goodwill and intangible assets |
|
82,383 |
216,190 |
Property, plant and equipment |
13 |
770,574 |
1,443,176 |
Deferred tax assets |
14 |
169,513 |
8,431 |
Non-current portion of inventory |
15 |
133,550 |
98,936 |
Derivative financial instruments |
16 |
907 |
821 |
Other
assets |
17 |
180,708 |
63,297 |
|
|
1,337,635 |
1,830,851 |
Current assets |
|
|
|
Inventories |
15 |
291,880 |
184,313 |
Trade
and other receivables |
18 |
18,085 |
18,830 |
Derivative financial instruments |
16 |
2,619 |
1,343 |
Other
current assets |
18 |
70,155 |
149,518 |
Cash
and cash equivalents |
|
80,513 |
317,791 |
|
|
463,252 |
671,795 |
Total assets |
|
1,800,887 |
2,502,646 |
EQUITY AND LIABILITIES |
|
|
|
Share
capital and share premium |
|
929,199 |
929,199 |
Other
reserves |
|
191,793 |
933,696 |
Total equity |
|
1,120,992 |
1,862,895 |
|
|
|
|
Non-current liabilities |
|
|
|
Borrowings |
19 |
42,600 |
71,000 |
Deferred tax liabilities |
14 |
99,533 |
148,390 |
Derivative financial instruments |
16 |
- |
30 |
Provisions |
20 |
127,028 |
145,722 |
Other
non-current liabilities |
|
5,038 |
15,699 |
|
|
274,199 |
380,841 |
Current liabilities |
|
|
|
Trade
and other payables |
20 |
350,450 |
222,543 |
Borrowings |
19 |
28,400 |
28,400 |
Derivative financial instruments |
16 |
481 |
584 |
Provisions |
21 |
24,650 |
7,235 |
Other
current liabilities |
|
1,715 |
148 |
|
|
405,696 |
258,910 |
Total liabilities |
|
679,895 |
639,751 |
|
|
|
|
Total equity and liabilities |
|
1,800,887 |
2,502,646 |
The notes on pages 43 to 63 are an integral part of this
financial information.
Consolidated statement of changes in
equity
(Unaudited) |
|
Share
capital |
Share
premium |
Contributed
surplus/Other reserve |
Cash flow hedging
reserve |
(in thousands of
United States dollars) |
|
|
|
|
|
Balance at 1
January 2016 (Audited) |
|
62,097 |
867,102 |
1,368,713 |
552 |
Profit for the
year |
|
- |
- |
- |
- |
Other comprehensive
income |
|
- |
- |
- |
7 |
Share option
grants |
|
- |
- |
- |
- |
Transactions with
non-controlling interest holders |
|
- |
- |
- |
- |
Dividends to equity
holders of the Company |
|
- |
- |
- |
- |
Balance at 31
December 2016 (Audited) |
|
62,097 |
867,102 |
1,368,713 |
559 |
Loss for the
year |
|
- |
- |
- |
- |
Other comprehensive
income |
|
- |
- |
- |
108 |
Share option
grants |
|
- |
- |
- |
- |
Transactions with
non-controlling interest holders |
|
- |
- |
- |
- |
Dividends to equity
holders of the Company |
|
- |
- |
- |
- |
Balance at 31
December 2017 (Unaudited) |
|
62,097 |
867,102 |
1,368,713 |
667 |
(Unaudited) |
|
Stock option
reserve |
Accumulated
losses |
Total
equity |
(in thousands of
United States dollars) |
|
|
|
|
Balance at 1
January 2016 (Audited) |
|
3,876 |
(514,841) |
1,787,499 |
Profit for the
year |
|
- |
94,944 |
94,944 |
Other comprehensive
income |
|
- |
- |
7 |
Share option
grants |
|
77 |
- |
77 |
Transactions with
non-controlling interest holders |
|
- |
- |
- |
Dividends to equity
holders of the Company |
|
- |
(19,632) |
(19,632) |
Balance at 31
December 2016 (Audited) |
|
3,953 |
(439,529) |
1,862,895 |
Loss for the
year |
|
- |
(707,394) |
(707,394) |
Other comprehensive
income |
|
- |
- |
108 |
Share option
grants |
|
(232) |
- |
(232) |
Transactions with
non-controlling interest holders |
|
- |
- |
- |
Dividends to equity
holders of the Company |
|
- |
(34,385) |
(34,385) |
Balance at 31
December 2017 (Unaudited) |
|
3,721 |
(1,181,308) |
1,120,992 |
The notes on pages 43 to 63 are an integral part of this
financial information.
Consolidated statement of cash
flows
|
|
For the year ended
31 December |
For
the year
ended
31 December |
|
|
(Unaudited) |
(Audited) |
(in
thousands of United States dollars) |
Notes |
2017 |
2016 |
Cash flows from operating activities |
|
|
|
Net
(loss)/profit for the year |
|
(707,394) |
94,944 |
Adjustments for: |
|
|
|
Tax (credit)/expense |
|
(2,272) |
147,113 |
Depreciation and amortisation |
|
125,968 |
156,301 |
Finance items |
|
10,463 |
9,535 |
Impairment charges |
|
850,182 |
- |
Loss/(Profit) on disposal of property, plant and equipment |
|
123 |
(289) |
Sale of mineral royalty |
|
(1,753) |
- |
Cash
settlement of share options |
|
(259) |
- |
Working capital movements |
12 |
(313,091) |
(58,497) |
Other
non-cash items |
12 |
22,160 |
(23,850) |
Cash (used in)/generated from operations before interest and
tax |
|
(15,873) |
325,257 |
Finance income |
|
1,944 |
1,512 |
Finance expenses |
|
(9,043) |
(8,793) |
Cash (used in)/generated by operating activities |
|
(22,972) |
317,976 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Purchase of property, plant and equipment |
|
(157,408) |
(193,643) |
Movement in other assets |
|
6,856 |
6,952 |
Acquired mineral interest |
|
- |
(5,000) |
Proceeds from sale of mineral royalty |
|
1,753 |
- |
Other
investing activities |
12 |
(2,912) |
6,528 |
Cash used in investing activities |
|
(151,711) |
(185,163) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Loans
paid |
|
(28,400) |
(28,400) |
Dividends paid |
|
(34,385) |
(19,632) |
Net
cash used in financing activities |
|
(62,785) |
(48,032) |
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents |
|
(237,468) |
84,781 |
Net
foreign exchange difference |
|
190 |
(258) |
Cash
and cash equivalents at 1 January |
|
317,791 |
233,268 |
Cash and cash
equivalents at year end |
|
80,513 |
317,791 |
|
|
|
|
|
|
|
|
|
The notes on pages 43 to 63 are an integral part of this
financial information.
Notes to the condensed financial
information
- 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 financial information for the year
ended 31 December 2017 was approved
for issue by the Board of Directors of the Company on 11 February 2017. The condensed consolidated
financial information does not comprise statutory accounts within
the meaning of section 434 of the Companies Act 2006. The condensed
consolidated financial information is unaudited.
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.
- Basis of Preparation of the condensed financial
information
The financial information set out above does not constitute the
Group’s statutory accounts for the year ended 31 December 2017, but is derived from the Group’s
full financial accounts, which are in the process of being audited.
The Group’s full financial accounts will be prepared under
International Financial Reporting Standards as adopted by the
European Union.
The condensed consolidated financial information has been
prepared under the historical cost convention basis, as modified by
the revaluation of financial assets and financial liabilities
(including derivative instruments) at fair value through profit and
loss. The financial statements are presented in US dollars (US$)
and all monetary results are rounded to the nearest thousand
dollars (US) except when otherwise indicated.
Where a change in the presentational format between the prior
year and current year condensed consolidated financial information
has been made during the period, comparative figures have been
restated accordingly. No presentational changes were made in the
current year.
The group’s activities expose it to a variety of financial
risks: market risk (including currency risk, fair value interest
rate risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk. The condensed financial statements do not
include all financial risk management information and disclosures
required in the annual financial statements; they should be read in
conjunction with the group’s annual financial statements as at
31 December 2017. There have been no
changes in the risk management department or in any risk management
policies since the year end.
The impact of the seasonality on operations is not considered as
significant on the condensed consolidated financial
information.
In assessing the Acacia Group’s going concern status the
Directors have taken into account the impact of the concentrate
export ban on ongoing 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 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
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 indicated that they are likely to issue an
emphasis of matter within their audit opinion included within the
Annual Report, 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 company’s
assets, liabilities and cash flows, and to include a separate
section within their audit opinion under the heading “Material
uncertainty related to going concern” detailing the matters
outlined above.
- Accounting Policies
Accounting policies have remained consistent with the prior year
except for the adoption of new standards and amendments to
standards.
- New and amended standards adopted by the Group
The following amendments to standards are applicable and were
adopted by the Group for the first time for the financial year
beginning 1 January 2017:
- Amendments to IAS 12, ‘Recognition of Deferred Tax Assets for
Unrealised Losses’. Amendments made to IAS 12 will aim to clarify
the accounting for deferred tax where an asset is measured at fair
value and that fair value is below the asset’s tax base. Effective
1 January 2017. The amendment did not
have a significant impact on the Group financial statements.
- Amendments to IAS 7, ‘Disclosure Initiative’. Going forward,
entities will be required to explain changes in their liabilities
arising from financing activities. This includes changes arising
from cash flows (e.g. drawdowns and repayments of borrowings) and
non-cash changes such as acquisitions, disposals, accretion of
interest and unrealised exchange differences. Changes in financial
assets must be included in this disclosure if the cash flows were,
or will be, included in cash flows from financing activities.
Effective 1 January 2017. The
amendment did not have a significant impact on the Group financial
statements.
- New and amended standards, and interpretations not yet
adopted
The following standards and amendments to existing standards
have been published and are mandatory for the Group’s accounting
periods beginning on or after 1 January
2017:
- Amendment to IFRS 9 -'Financial instruments'. IFRS 9 replaces
the multiple classification and measurement models in IAS 39
Financial instruments: Recognition and measurement with a single
model that has initially only two classification categories:
amortised cost and fair value. The amendment is however not
expected to have a significant impact on the Group.
- IFRS 15 – Revenue from contracts with customers. This standard
is a single, comprehensive revenue recognition model for all
contracts with customers to achieve greater consistency in the
recognition and presentation of revenue. Revenue is recognised
based on the satisfaction of performance obligations, which occurs
when control of good or service transfers to a customer. Effective
1 January 2018. The standard is not
expected to have a significant impact on the Group.
- IFRS 16 – ‘Leases’. IFRS 16 supersedes IAS 17, ‘Leases’, IFRIC
4, ‘Determining whether an Arrangement contains a Lease’, SIC 15,
‘Operating Leases – Incentives’ and SIC 27, ‘Evaluating the
Substance of Transactions Involving the Legal Form of a Lease’.
IFRS 16 will affect primarily the accounting by lessees and will
result in the recognition of almost all leases on balance sheet.
The standard removes the current distinction between operating and
financing leases and requires recognition of an asset (the right to
use the leased item) and a financial liability to pay rentals for
virtually all lease contracts. Effective 1
January 2019. Management is currently evaluating the impact
of new standard in order to put all frameworks and systems in
place. Based on initial investigation, the standard is not expected
to have a significant impact on the Group, due to majority of our
existing contracts either relate to service agreements or the
performance obligations based on variable terms and thus not
resulting in a right of use asset.
- Amendments to IFRS2, ‘Classification and Measurement of
Share-based Payment Transactions’. The amendments made to AASB 2 in
July 2016 clarify the measurement
basis for cash-settled share-based payments and the accounting for
modifications that change an award from cash-settled to
equity-settled. Effective 1 January
2018. The standard is not expected to have a significant
impact on the Group.
- Amendments to IFRS 10, 'Consolidated financial statements' and
IAS 28,'Investments in associates and joint ventures' on sale or
contribution of assets. The IASB has issued this amendment to
eliminate the inconsistency between IFRS 10 and IAS 28. The IASB
decided to defer the application date of this amendment, until such
time this is not applicable. The amendment is however not expected
to have a significant impact on the Group. IFRS 9 – Financial
Instruments (2009 &2010). The IASB has updated IFRS 9,
‘Financial instruments’ to include guidance on financial
liabilities and de-recognition of financial instruments. The
accounting and presentation for financial liabilities and for
derecognising financial instruments has been relocated from IAS 39,
‘Financial instruments: Recognition and measurement’, without
change, except for financial liabilities that are designated at
fair value through profit or loss. . Effective 1 January 2018. The standard is not expected to
have a significant impact on the Group.
- 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 consist 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 31 December
2017 and 31 December 2016 is
set out below.
|
For the year ended 31 December
2017 |
(Unaudited)
(in thousands of United States dollars) |
North
Mara |
Bulyanhulu |
Buzwagi |
Other |
Total |
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 costs |
- |
(571) |
- |
(24,258) |
(24,829) |
Other charges and
corporate social responsibility expenses |
(13,243) |
(52,916) |
(13,605) |
(18,819) |
(98,583) |
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
credit/(expense) |
|
|
|
|
2,272 |
Net
loss 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 addition |
(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 charges |
26 |
59 |
35 |
|
45 |
Share
based payments |
(2) |
(6) |
(2) |
|
(14) |
Rehabilitation - accretion and depreciation |
11 |
20 |
5 |
|
11 |
Corporate social responsibility expenses |
11 |
10 |
8 |
|
14 |
Capitalised stripping/ UG development |
188 |
367 |
- |
|
170 |
Sustaining capital expenditure |
71 |
83 |
27 |
|
62 |
All-in sustaining
cost per ounce sold2 |
803 |
1,373 |
667 |
|
875 |
|
|
|
|
|
|
Segment carrying
value3 |
249,170 |
600,359 |
194,385 |
82,864 |
1,126,778 |
|
For the year ended 31 December
2016 |
(Audited)
(in thousands of United States dollars) |
North
Mara |
Bulyanhulu |
Buzwagi |
Other |
Total |
Gold
revenue |
468,340 |
345,481 |
200,648 |
- |
1,014,469 |
Co-product revenue |
953 |
15,447 |
22,663 |
- |
39,063 |
Total segment revenue |
469,293 |
360,928 |
223,311 |
- |
1,053,532 |
Segment cash operating
cost1 |
(155,344) |
(217,226) |
(188,896) |
- |
(561,466) |
Realised losses on
gold hedges |
- |
- |
(1,818) |
- |
(1,818) |
Corporate
administration |
(7,954) |
(5,975) |
(4,176) |
(3,790) |
(21,895) |
Share-based
payments |
(623) |
(518) |
(470) |
(28,318) |
(29,929) |
Exploration and
evaluation costs |
(297) |
(3,532) |
- |
(20,191) |
(24,020) |
Other charges and
corporate social responsibility expenses |
(2,295) |
(3,442) |
(723) |
7,444 |
984 |
EBITDA2 |
302,780 |
130,235 |
27,228 |
(44,855) |
415,388 |
Impairment charges |
- |
- |
- |
- |
- |
Depreciation and
amortisation4 |
(67,472) |
(82,022) |
(12,668) |
(1,634) |
(163,796) |
EBIT2 |
235,308 |
48,213 |
14,560 |
(46,489) |
251,592 |
Finance income |
|
|
|
|
1,512 |
Finance expense |
|
|
|
|
(11,047) |
Profit before taxation |
|
|
|
|
242,057 |
Tax expense |
|
|
|
|
(147,113) |
Net
profit for the year |
|
|
|
|
94,944 |
|
|
|
|
|
|
Capital expenditure: |
|
|
|
|
|
Sustaining |
23,558 |
20,231 |
3,582 |
1,416 |
48,787 |
Expansionary |
2,399 |
1,262 |
- |
- |
3,661 |
Capitalised development |
75,609 |
63,082 |
- |
- |
138,691 |
|
101,566 |
84,575 |
3,582 |
1,416 |
191,139 |
Non-cash capital expenditure adjustments |
|
|
|
|
Reclamation asset addition |
6,703 |
10,728 |
4,524 |
- |
21,955 |
Total capital expenditure |
108,269 |
95,303 |
8,106 |
1,416 |
213,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental cash operating cost |
155,344 |
217,226 |
188,896 |
|
561,466 |
Deduct: co-product revenue |
(953) |
(15,447) |
(22,663) |
|
(39,063) |
Total
cash costs |
154,391 |
201,779 |
166,233 |
|
522,403 |
Sold
ounces |
376,255 |
279,286 |
161,202 |
|
816,743 |
Cash cost per ounce
sold2 |
410 |
722 |
1,031 |
|
640 |
Corporate administration charges |
21 |
21 |
26 |
|
27 |
Share
based payments |
2 |
2 |
3 |
|
37 |
Rehabilitation - accretion and depreciation |
9 |
7 |
3 |
|
7 |
Corporate social responsibility expenses |
15 |
6 |
10 |
|
13 |
Capitalised stripping/ UG development |
201 |
226 |
- |
|
170 |
Sustaining capital expenditure |
75 |
74 |
22 |
|
64 |
All-in sustaining
cost per ounce sold2 |
733 |
1,058 |
1,095 |
|
958 |
|
|
|
|
|
|
Segment carrying
value3 |
246,175 |
1,231,793 |
97,243 |
82,710 |
1,657,921 |
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 33 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
include the depreciation component of the cost of inventory
sold
- Revenue
|
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in thousands of
United States dollars) |
2017 |
2016 |
Gold
doré sales |
720,755 |
739,317 |
Gold
concentrate sales¹ |
23,539 |
275,152 |
Copper
concentrate sales¹ |
4,001 |
32,658 |
Silver
sales |
3,220 |
6,405 |
Total |
751,515 |
1,053,532 |
- Concentrate sales includes negative provisional price
adjustments to the accounts receivable balance due to changes in
market gold, silver and copper prices prior to final settlement as
follows: US$3.6 million for the year
ended 31 December 2017 (US$7.0 million for the year ended 31 December 2016).
(in
thousands of United States dollars) |
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
Revenue by Location of Customer2 |
2017 |
2016 |
Europe |
|
|
Switzerland |
140,691 |
488,383 |
Germany |
11,615 |
58,747 |
Asia |
|
|
India |
582,943 |
253,881 |
China |
437 |
176,143 |
Japan |
15,829 |
76,378 |
Total revenue |
751,515 |
1,053,532 |
- Revenue by location of customer is determined based on the
country to which the gold is delivered.
Included in revenues for the year ended 31 December 2017 are sales to six major
customers. Revenues of approximately US$739
million (2016: US$913 million)
arose from sales to four of the Group’s largest customers.
- Exploration and Evaluation costs
The following represents a summary of exploration and evaluation
expenditures incurred at each mine site and significant exploration
targets (if applicable).
|
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in thousands of
United States dollars) |
2017 |
2016 |
Expensed during the year: |
|
|
North
Mara |
- |
297 |
Bulyanhulu |
571 |
3,532 |
Kenya |
12,208 |
10,582 |
West
Africa |
11,119 |
7,544 |
Other1 |
931 |
2,065 |
Total
expensed |
24,829 |
24,020 |
Capitalised during the year: |
|
|
North
Mara |
10,270 |
2,399 |
Total |
35,099 |
26,419 |
1 - Included in “other” are the exploration activities
conducted through ABG Exploration Limited. All primary greenfield
exploration and evaluation activities are conducted in this
company.
- Impairment
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.
Acacia has identified triggers for impairment testing of the
carrying value of its assets, including but not limited to the
challenges experienced in the operating environment in Tanzania, the announcement of new legislation
by the GoT in respect of the natural resources sector and the
resulting decision to reduce operations at Bulyanhulu..
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 including goodwill.
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 and
approval. 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. For the
purposes of the carrying value assessments, Acacia has assumed that
concentrate sales will resume from 1 July
2018 and Bulyanhulu will return to full operation towards
the end of 2019, VAT refunds will recommence and historic carried
forward tax losses will continue to be available to offset against
future taxable profits. Barrick has previously announced that it is
targeting H1 2018 for agreement of the detailed terms and
documentation for a comprehensive settlement reflecting the key
terms of the Framework announcements.
Acacia continues to provide support to Barrick in its
discussions with the GoT, Acacia has not yet received for review
and approval a detailed proposal that has been agreed between
Barrick and the GoT, and 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 31 December 2017, the discount
rate should be increased 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 used a discount rate of 11% compared to
Acacia’s updated calculated weighted average cost of capital of
6.5% (2016:5%).
The key economic assumptions used in the reviews during 2017 and
2016 were:
|
For
the year ended
31 December |
For
the year ended
31 December |
|
2017 |
2016 |
Gold
price per ounce |
US$1,200 |
US$1,200 |
Copper
price per pound |
US$2.75 |
US$2.25 |
British Pound (US$:GBP) |
0.76 |
0.74 |
Tanzanian Shilling (US$:TZS) |
2,250 |
2,150 |
Long-term oil price per barrel |
US$60 |
US$60 |
WACC |
6.5% |
5% |
Discount rate used in carrying value review |
11% |
5% |
NPV
multiples |
1 |
1 |
The carrying value assessment demonstrates a reduction in value
at all three CGUs, however, based on these assumptions Buzwagi and
North Mara have headroom above their current carrying values. At
Bulyanhulu, the impact of the changes was greater, due to the long
life of the mine and the delay to a return to positive cash
generation due to the move to reduced operations. Acacia has
recorded a net impairment of US$632.0
million for Bulyanhulu, which includes a pre-tax write-down
of US$122 million for goodwill. In
addition we have recorded an impairment charge of US$12.3 million for the Nyanzaga Project to
reflect the impact of the new mining laws on the carrying value of
the project, which now stands at US$34
million.
The adjusted carrying value for the Group is now approximately
US$1.1 billion, made up of
US$0.6 billion for Bulyanhulu,
US$0.2 billion for North Mara,
US$0.2 billion for Buzwagi and
US$0.1 billion for exploration and
other.
The impairment charges recognised in the income statement for
the year ended 31 December comprise the following:
|
For
the year ended
31 December |
For
the year ended
31 December |
(in thousands of
United States dollars) |
2017 |
2016 |
Bulyanhulu |
837,921 |
- |
Nyanzaga exploration property1 |
12,261 |
- |
Gross impairment charge |
850,182 |
- |
Comprising: |
|
|
Impairment of goodwill |
121,546 |
|
Impairment of property, plant and equipment |
686,375 |
- |
Impairment of supplies inventory |
30,000 |
- |
Impairment of intangible assets |
12,261 |
- |
Gross impairment charge, before tax |
850,182 |
- |
Deferred income tax |
(205,912) |
- |
Total impairment charge |
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.
For purposes of testing for impairment of long-lived assets, we
have assessed whether a reasonably possible change in any of the
key assumptions used to estimate the recoverable value for CGUs
would result in an impairment charge.
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 each of the CGUs. 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 12 months.
Under these scenarios, a reasonably possible decrease in the
gold price assumption of US$100 per
ounce would result in an additional impairment charge, net of tax,
relating to Bulyanhulu of approximately US$172 million, while a similar increase in gold
price would result in a reduction in the impairment charge of
similar value. In addition, given limited headroom, a similar
decrease would result in an impairment charge of US$43m at Buzwagi, whilst at North Mara headroom
would be maintained.
Under the assumptions as set out above, a further delay in the
resolution of the export ban will result in an additional
impairment charge of US$56 million
for Bulyanhulu, while headroom is maintained for North Mara and
Buzwagi.
A reasonably possible increase in discount rate of 1% would
result in an additional impairment relating to Bulyanhulu of
US$63 million, with a reasonably
possible decrease in discount rate of 1% resulting in a reduction
in impairment charges of similar value. Buzwagi and North Mara will
not be affected.
A reasonably possible adverse change in any of the assumptions
set out above will result in an additional impairment relating to
Nyanzaga.
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.
- Other Charges/(Income)
|
For
the year ended
31 December |
For the year ended
31 December |
|
(Unaudited) |
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Other expenses |
|
|
Restructuring costs |
25,077 |
7,689 |
Discounting of indirect tax receivables |
13,276 |
- |
Bulyanhulu reduced operations costs1 |
24,804 |
- |
Foreign exchange losses |
2,710 |
- |
Legal costs |
14,421 |
2,641 |
One off legal settlement |
5,083 |
- |
Project development costs |
1,485 |
1,123 |
Inventory write-downs |
1,500 |
- |
Other |
5,573 |
4,583 |
Total |
93,929 |
16,036 |
|
|
|
Other income |
|
|
Bad debts recovered |
- |
(54) |
Discounting of indirect tax receivables |
- |
(9,719) |
Profit on disposal of property, plant and equipment |
- |
(289) |
Unrealised non-hedge derivative gains |
(200) |
(13,031) |
Foreign exchange gains |
- |
(1,137) |
Insurance proceeds |
- |
(3,455) |
Other |
(3,359) |
- |
Total |
(3,559) |
(27,685) |
|
|
|
Total other charges/(income) |
90,370 |
(11,649) |
|
|
|
|
1 Includes US$13.9 million of non-sustaining operating
costs allocated, US$4.9m of contract
exit costs and US$6 million of
inventory written down as a result of moving to reduced operational
state.
- Finance Income and Expenses
a)Finance income
|
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Interest on time deposits |
1,841 |
1,236 |
Other |
103 |
276 |
Total |
1,944 |
1,512 |
b) Finance expense
|
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Unwinding of discount1 |
3,364 |
2,254 |
Revolving credit facility charges2 |
2,341 |
2,279 |
Interest on CIL facility |
2,911 |
3,956 |
Premium on gold put options |
2,113 |
- |
Interest on finance leases |
204 |
- |
Bank
charges |
583 |
701 |
Other |
891 |
1,857 |
Total |
12,407 |
11,047 |
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.
- Tax (Credit)/Expense
|
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Current tax: |
|
|
Current tax on profits for the year |
35,667 |
54,508 |
Adjustments in respect of prior years1 |
172,000 |
36,697 |
Total current tax |
207,667 |
91,205 |
Deferred tax: |
|
|
Origination and reversal of temporary differences2 |
(209,939) |
55,908 |
Total deferred tax |
(209,939) |
55,908 |
Income tax (credit)/expense |
(2,272) |
147,113 |
1 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. Included in 2016 is a provision for
uncertain tax positions of US$30.4
million relating to North Mara, and US$4.4 million relating to Tulawaka, following an
adverse tax ruling as reported in Q1 2016.
2 Included in 2016 is a provision for uncertain tax
positions of US$35.0 million relating
to Bulyanhulu following an adverse tax ruling, as reported in Q1
2016.
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 year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
(Loss)/ profit before tax |
(709,666) |
242,057 |
Tax calculated at
domestic tax rates applicable to profits in the respective
countries |
(209,074) |
73,373 |
Tax
effects of: |
|
|
Difference in tax rates in different jurisdictions |
(3,826) |
(756) |
Expenses not deductible for tax purposes3 |
49,142 |
247 |
Tax losses for which
no deferred income tax asset was recognised |
9,611 |
76,592 |
Utilisation of previously unrecognised tax losses |
(25,594) |
- |
Increase in provision for uncertain tax positions4 |
172,000 |
- |
Other
permanent differences |
5,469 |
(2,343) |
Tax
(credit)/charge |
(2,272) |
147,113 |
3 Relates mainly to impairment charges relating to
goodwill, intangibles and supplies inventory not deductible for tax
purposes. Refer note 7 for full details
4 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 addition to the net impairment as set out in note 7, to meet
applicable accounting standards, Acacia has also raised an
additional tax provision of US$172
million relating to the estimated uncertain tax positions
for its operating companies. Management has 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 brings
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 is
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.
- (Loss)/Earnings Per Share (EPS)
Basic EPS is calculated by dividing the net (loss)/profit for
the year attributable to owners of the Company by the weighted
average number of Ordinary Shares in issue during the year.
Diluted earnings 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 31 December 2017 and
31 December 2016, earnings per share
have been calculated as follows:
|
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
(Loss)/Earnings |
|
|
Net (loss)/profit from
continuing operations attributable to owners of the parent |
(707,394) |
94,944 |
|
|
|
Weighted average number of Ordinary Shares in issue |
410,085,499 |
410,085,499 |
Adjusted for dilutive effect of stock options |
- |
355,514 |
Weighted average
number of Ordinary Shares for diluted earnings per share |
410,085,499 |
410,441,013 |
|
|
|
(Loss)/Earnings per share |
|
|
Basic
(loss)/earnings per share (cents) |
(172.5) |
23.2 |
Dilutive (loss)/earnings per share (cents) |
(172.5) |
23.1 |
- Cash flow – other items
a) Operating cash flows - other
items
Movements relating to working capital items
|
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Indirect and corporate taxes1 |
(89,560) |
(59,100) |
Increase in indirect tax receivable |
(51,703) |
(18,224) |
Prepaid corporate tax |
- |
(20,000) |
Income tax paid – Final |
(3,257) |
- |
Income tax paid – Provisional |
(34,600) |
(20,876) |
Other
current assets2 |
(10,774) |
695 |
Trade
receivables |
745 |
(4,472) |
Inventories3 |
(172,180) |
(8,312) |
Other
liabilities4 |
(7,301) |
33,582 |
Share
based payments4 |
(1,780) |
(35,966) |
Trade
and other payables5 |
(31,170) |
15,931 |
Other
working capital items6 |
(1,071) |
(855) |
Total |
(313,091) |
(58,497) |
1 During the year, we have made US$34.6 million (2016: US$20.0 million) corporate tax provisional
payments as well as US$ 3.3 million
final corporate tax payments relating to North Mara’s 2016 tax
assessment. This has been funded through an offset against current
indirect taxes that was due for refund.
2 Other current assets include North Mara corporate tax
deposits paid of US$9.5
million.
3 The inventory adjustment includes the movement in current
as well as the non-current portion of inventory.
4 The other liabilities adjustment mainly relate to the
revaluation of future shared based payments. During the year, share
based payments of US$1.8 million
(2016: US$36.0 million) was
made.
5 The trade and other payables adjustment exclude statutory
liabilities in the form of income tax payable.
6 Other working capital items include exchange losses
associated with working capital.
Other non-cash items
|
For
the year
ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Adjustments for non-cash income statement items: |
|
|
Foreign exchange losses/(gains) |
2,900 |
(1,463) |
Discounting of indirect tax receivables |
13,276 |
(9,719) |
Provisions added |
7,550 |
- |
Provisions settled |
- |
(8) |
Movement in derivatives |
(1,495) |
(13,031) |
Stock
option expense |
27 |
77 |
Other
non-cash items |
92 |
36 |
Exchange loss on revaluation of cash balances |
(190) |
258 |
Total |
22,160 |
(23,850) |
b) Investing cash flows - other
items
|
For
the year ended
31 December
(Unaudited) |
For
the year ended
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Proceeds on sale of property, plant and equipment |
- |
6,713 |
Other
long-term receivables |
194 |
(10) |
Rehabilitation expenditure |
(3,106) |
(175) |
Total |
(2,912) |
6,528 |
- Property, Plant and Equipment
For the year ended
31 December 2017 (Unaudited)
(in thousands of United States dollars) |
Plant and equipment |
Mineral properties and mine development costs |
Assets under construction¹ |
Total |
At 1 January 2017, net
of accumulated depreciation |
553,993 |
842,019 |
47,164 |
1,443,176 |
Additions |
- |
- |
147,739 |
147,739 |
Non-cash reclamation asset adjustment |
(9,087) |
- |
- |
(9,087) |
Foreign currency translation adjustments |
1,212 |
- |
- |
1,212 |
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 impairment |
(1,360,529) |
(935,258) |
- |
(2,295,787) |
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 impairment |
(1,698,075) |
(1,401,009) |
- |
(3,099,084) |
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 Impairment in 2017 relates to property plant and
equipment at Bulyanhulu. Refer to note 7 for further
detail.
For the year ended
31 December 2016 (Audited)
(in thousands of United States dollars) |
Plant and equipment |
Mineral properties and mine development costs |
Assets under construction¹ |
Total |
At 1 January 2016, net
of accumulated depreciation |
572,877 |
761,592 |
56,244 |
1,390,713 |
Additions |
- |
- |
191,139 |
191,139 |
Non-cash reclamation asset adjustment |
21,955 |
- |
- |
21,955 |
Foreign currency translation adjustments |
2,203 |
- |
- |
2,203 |
Disposals/write-downs |
(6,533) |
- |
- |
(6,533) |
Depreciation |
(95,864) |
(60,437) |
- |
(156,301) |
Transfers between categories |
59,355 |
140,864 |
(200,219) |
- |
At
31 December 2016 |
553,993 |
842,019 |
47,164 |
1,443,176 |
|
|
|
|
|
At 1
January 2016 |
|
|
|
|
Cost |
1,845,234 |
1,636,413 |
56,244 |
3,537,891 |
Accumulated depreciation and impairment |
(1,272,357) |
(874,821) |
- |
(2,147,178) |
Net
carrying amount |
572,877 |
761,592 |
56,244 |
1,390,713 |
|
|
|
|
|
At 31
December 2016 |
|
|
|
|
Cost |
1,914,522 |
1,777,277 |
47,164 |
3,738,963 |
Accumulated depreciation and impairment |
(1,360,529) |
(935,258) |
- |
(2,295,787) |
Net
carrying amount |
553,993 |
842,019 |
47,164 |
1,443,176 |
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.
Leases
Property, plant and equipment include 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 include five drill rigs
purchased under short-term finance leases.
The following amounts were included in property, plant and
equipment where the Group was a lessee under a finance lease:
|
|
|
As
at
31 December |
As
at
31 December |
(in thousands of United States dollars) |
|
2017
(Unaudited) |
2016
(Audited) |
Cost - capitalised finance leases |
|
|
51,618 |
51,617 |
Accumulated depreciation and impairment |
|
|
(42,948) |
(40,925) |
Net carrying amount |
|
|
8,670 |
10,692 |
- Deferred Tax Assets and Liabilities
Unrecognised
deferred tax assets
Deferred tax assets have not been recognised in respect of the
following items:
|
As
at
31 December |
As
at
31 December |
(in thousands of
United States dollars) |
(Unaudited)
2017 |
(Audited)
2016 |
Tax
losses |
599,569 |
648,984 |
Total |
599,569 |
648,984 |
The above tax losses, which translate into deferred tax assets
of approximately US$165 million
(2016: US$184 million), have not been
recognised in respect of these items due to uncertainties regarding
availability of tax losses, or there being uncertainty regarding
future taxable income against which these assets can be
utilised.
Recognised
deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following:
Balance sheet classifications
Balance sheet
classification |
Assets |
Liabilities |
Net |
(in thousands of
United States dollars) |
2017 |
2016 |
2017 |
2016 |
2017 |
2016 |
Property, plant and
equipment |
- |
- |
196,921 |
390,050 |
196,921 |
390,050 |
Provisions |
(8,293) |
(4,456) |
- |
- |
(8,293) |
(4,456) |
Interest deferrals |
(59) |
(479) |
542 |
- |
483 |
(479) |
Tusker
acquisition |
- |
- |
6,235 |
6,354 |
6,235 |
6,354 |
Tax
loss carry-forwards |
(265,326) |
(251,510) |
- |
- |
(265,326) |
(251,510) |
Net deferred tax
(assets)/liabilities |
(273,678) |
(256,445) |
203,698 |
396,404 |
(69,980) |
139,959 |
Legal entities
Legal
entities |
Assets |
Liabilities |
Net |
(in thousands of
United States dollars) |
2017 |
2016 |
2017 |
2016 |
2017 |
2016 |
North Mara Gold Mine
Ltd |
- |
- |
91,321 |
77,529 |
91,321 |
77,529 |
Bulyanhulu Gold Mine
Ltd |
(160,600) |
- |
- |
64,539 |
(160,600) |
64,539 |
Pangea Minerals
Ltd1 |
(8,258) |
(7,504) |
- |
- |
(8,258) |
(7,504) |
Other |
(655) |
(927) |
8,212 |
6,322 |
7,557 |
5,395 |
Net deferred tax
(assets)/liabilities |
(169,513) |
(8,431) |
99,533 |
148,390 |
(69,980) |
139,959 |
Uncertainties regarding availability of tax losses in respect of
enquiries raised and additional tax assessments issued by the TRA,
have been measured using the single best estimate of likely outcome
approach resulting in the recognition of substantially all the
related deferred tax assets and liabilities. Alternative acceptable
measurement policies (e.g. on a weighted average expected outcome
basis) could result in a change to deferred tax assets and
liabilities being recognised, and the deferred tax charge in the
income statement.
No deferred tax has been recognised in respect of temporary
differences associated with investments in subsidiaries where the
Group is in a position to control the timing of the reversal of the
temporary differences, and it is probable that such differences
will not reverse in the foreseeable future. The aggregate amount of
temporary differences associated with such investments in
subsidiaries is represented by the contribution of those
investments to the Group’s retained earnings and amounted to
US$412 million (2016: US$411 million).
- Inventories
|
As
at
31 December |
As
at
31 December |
(in
thousands of United States dollars) |
2017 |
2016 |
Raw
materials |
|
|
Ore in
stockpiles |
22,253 |
8,269 |
Mine operating supplies1 |
117,946 |
143,610 |
Work in process |
5,103 |
10,534 |
Finished products |
|
|
Gold
doré/bullion |
7,078 |
8,692 |
Gold,
copper and silver concentrate2 |
139,500 |
13,208 |
Total
current portion of inventory |
291,880 |
184,313 |
Non-current ore in stockpiles |
133,550 |
98,936 |
Total |
425,430 |
283,249 |
1 Mine operating supplies for 2017 includes the impairment
of US$30.0 million relating to
Bulyanhulu, Refer to note 7 for further details.
2 Gold, copper and silver concentrate on hand relate to
finished products at Bulyanhulu (US$ 88.5
million) and Buzwagi (US$US$51.0 million) due to the
inability to export concentrate since March
2017.
- 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
31 December 2017 and 31 December 2016.
|
Assets |
Liabilities |
|
For the year ended
31 December 2017
(in thousands of United States dollars) |
Current |
Non-current |
Current |
Non-current |
Net
fair value |
Interest contracts: Designated as cash flow hedges |
531 |
667 |
481 |
- |
717 |
Commodity contracts: Not designated as hedges |
2,088 |
240 |
- |
- |
2,328 |
Total |
2,619 |
907 |
481 |
- |
3,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
Liabilities |
|
For the year ended
31 December 2016
(in thousands of United States dollars) |
Current |
Non-current |
Current |
Non-current |
Net
fair value |
Interest contracts: Designated as cash flow hedges |
33 |
255 |
73 |
- |
215 |
Commodity contracts: Not designated as hedges |
1,310 |
566 |
511 |
30 |
1,335 |
Total |
1,343 |
821 |
584 |
30 |
1,550 |
- Other Assets
|
As
at
31 December
(Unaudited) |
As
at
31 December
(Audited) |
(in thousands of
United States dollars) |
2017 |
2016 |
Amounts due from government1 |
11,629 |
11,748 |
Operating lease prepayments - TANESCO powerlines |
374 |
809 |
Prepayments - Acquisition of rights over leasehold
land2 |
35,948 |
42,250 |
Non-current portion of indirect tax receivable3 |
132,405 |
7,945 |
Village housing |
151 |
254 |
Deferred finance charges |
201 |
291 |
Total |
180,708 |
63,297 |
- Included in this amount are amounts receivable from the
NSSF of US$6.7 million (2016:
US$5.4 million) as well as amounts
due from TANESCO of US$1.0 million
(2016: US$3.1 million).
- Prepayments made to the landowners in respect of
acquisition of the rights over the use of leasehold
land.
- The non-current portion of indirect tax receivables was
subject to discounting to its current value using a discount rate
of 6.5% (2016: 5%). This resulted in a discounting debit of
US$13.3 million (2016: US$9.7 million credit) to the income statement
(refer note 8).
- Trade Receivables and Other Current Assets
|
As
at
31 December
(Unaudited) |
As
at
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Trade
and other receivables: |
|
|
Amounts due from doré and concentrate sales |
18 |
7,841 |
Amounts due from realised gains on gold put options |
1,356 |
- |
Amounts due from royalty income |
1,453 |
- |
Other
receivables¹ |
16,156 |
12,023 |
Due
from related parties |
40 |
40 |
Less:
Provision for doubtful debt on other receivables |
(938) |
(1,074) |
Total |
18,085 |
18,830 |
1 Other receivables relates to employee and supplier back
charge-related receivables and refundable deposits.
Trade receivables other than concentrate receivables are
non-interest bearing and are generally on 30-90 day terms.
Concentrate receivables are generally on 60-120 day terms depending
on the terms per contract. Trade receivables are amounts due from
customers in the ordinary course of business. If collection is
expected in one year or less, they are classified as current
assets; if not, they are presented as non-current assets. The
carrying value of trade receivables recorded in the financial
statements represents the maximum exposure to credit risk. The
Group does not hold any collateral as security.
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less any provisions for impairment. A provision
for impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables.
|
As
at
31 December
(Unaudited) |
As
at
31 December
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
Other
current assets: |
|
|
Current portion of indirect tax receivables² |
38,285 |
128,423 |
Other
receivables and advance payments³ |
31,870 |
21,095 |
Total |
70,155 |
149,518 |
2 The current portion of indirect tax
receivables includes an amount of US$31.4
million relating to North Mara as it is 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.
3 Other receivables and advance
payments mainly relate to prepayments for insurance US$9.4 million (2016: US$6.5 million), corporate tax deposit paid at
North Mara US$9.5 million and current
amounts receivable from the NSSF of US$4.8
million (2016: US$5.0
million).
- 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 material
adverse effect clauses. The interest rate has been fixed at 3.6%
through the use of an interest rate swap. The seven year Facility
is repayable in equal 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 during
2017 two payments of US$14.2 million
were paid. As at 31 December 2017 the
balance owing was US$71.0 million
(2016: US$99.4 million). Interest
accrued to the value of US$0.5
million (2016: US$0.6 million)
was included in accounts payable at year end. Interest incurred on
the borrowings as well as hedging losses on the interest rate swap
for the year ended 31 December 2017
was US$2.9 million (2016:
US$4.0 million).
- Trade and Other Payables
|
|
|
|
|
|
|
As
at
31 December |
As
at
31 December |
(in thousands of United States dollars) |
2017 |
2016 |
Trade
payables |
62,610 |
84,294 |
Income
tax payable |
11,442 |
13,632 |
Accrued expenses |
40,958 |
54,344 |
Payroll-related payables |
12,185 |
20,182 |
Contract retentions |
- |
- |
Royalty payable |
988 |
1,114 |
Provisions for uncertain tax positions1 |
206,912 |
34,912 |
Amounts due to related parties |
15,355 |
14,065 |
Total |
350,450 |
222,543 |
1 Included in the 2017 amount are provisions
raised 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. Included in the amount for 2016
are accruals raised for uncertain tax positions in order to address
the direct impact of the ruling on historic tax assessments and the
potential impact this may have on the applicability of certain
deductions for prior years at North Mara and Tulawaka (US$34.8 million).
- Provisions
|
Rehabilitation¹ |
Other² |
Total |
(in thousands of
United States dollars) |
2017 |
2016 |
2017 |
2016 |
2017 |
2016 |
At 1
January |
152,205 |
128,170 |
752 |
761 |
152,957 |
128,931 |
Change in
estimate |
(9,087) |
21,956 |
- |
- |
(9,087) |
21,956 |
Utilised during the
year |
(3,106) |
(175) |
- |
(9) |
(3,106) |
(184) |
Unwinding of
discount |
3,364 |
2,254 |
- |
- |
3,364 |
2,254 |
Additions |
- |
- |
7,550 |
- |
7,550 |
|
At
31 December |
143,376 |
152,205 |
8,302 |
752 |
151,678 |
152,957 |
Current portion |
(16,348) |
(6,483) |
(8,302) |
(752) |
(24,650) |
(7,235) |
Non-current portion |
127,028 |
145,722 |
- |
- |
127,028 |
145,722 |
1 Rehabilitation provisions relate to the decommissioning costs
expected to be incurred for the operating mines. This expenditure
arises at different times over the LOM for the different mine sites
and is expected to be utilised in terms of cash outflows between
years 2018 and 2041 and beyond, varying from mine site to mine
site. The change in estimate in the current year relates mainly to
deferrals in estimated cash flows resulting in a lower net present
value combined with slight changes in the US risk free rates
driving a change in discount rate.
2 Other provisions relate to provisions for legal and
tax-related liabilities where the outcome is not yet certain but it
is expected that it will lead to a probable outflow of economic
benefits in future US$3.9 million
(2016: US$0.7 million) as well as
severance provisions mainly at Bulyanhulu as part of the reduced
operations and redundancies at Buzwagi due to mining activities
coming to an end (US$ 4.4
million).
Rehabilitation obligations arise from the acquisition,
development, construction and normal operation of mining property,
plant and equipment, due to government controls and regulations
that protect the environment on the closure and reclamation of
mining properties. The major parts of the carrying amount of the
obligation relate to tailings and waste rock dumps
closure/rehabilitation and surface contouring; demolition of
buildings/mine facilities; ongoing water treatment; and ongoing
care and maintenance of closed mines. The fair values of
rehabilitation provisions are measured by discounting the expected
cash flows using a discount factor that reflects the
credit-adjusted risk-free rate of interest. Acacia prepares
estimates of the timing and amount of expected cash flows when an
obligation is incurred and updates expected cash flows to reflect
changes in facts and circumstances. The principal factors that can
cause expected cash flows to change are: the construction of new
processing facilities; changes in the quantities of material in
reserves and a corresponding change in the LOM plan; changing ore
characteristics that impact required environmental protection
measures and related costs; changes in water quality that impact
the extent of water treatment required; and changes in laws and
regulations governing the protection of the environment.
Each year Acacia assesses cost estimates and other assumptions
used in the valuation of the rehabilitation provision at each
mineral property to reflect events, changes in circumstances and
new information available. Changes in these cost estimates and
assumptions are recorded as an adjustment to the carrying amount of
the corresponding asset. Rehabilitation provisions are adjusted to
reflect the passage of time (accretion) calculated by applying the
discount factor implicit in the initial fair-value measurement to
the beginning-of-period carrying amount of the provision.
Settlement gains/losses will be recorded in other
(income)/expense.
Other environmental remediation costs that are not
rehabilitation provisions are expensed as incurred.
20. Commitments and Contingencies
The Group is subject to various laws and regulations which, if
not observed, could give rise to penalties. As at 31 December 2017, the Group has the following
commitments and/or contingencies.
- Legal contingencies
As at 31 December 2017, the
Group was a defendant in a number of lawsuits. The plaintiffs are
claiming damages and interest thereon in respect of claims 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. The Group’s Legal
Counsel is defending the Group’s current position. 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.
- 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. Please refer to note 10 for
further information.
- Exploration and development agreements – Mining
Licences
Pursuant to agreements with the Government of the United
Republic of Tanzania, the Group
was issued special mining licences for Bulyanhulu, Buzwagi, and
North Mara mines and mining licences for building materials at
Bulyanhulu and Buzwagi Mines. The agreement requires the Group to
pay to the government of Tanzania
annual rents of US$5,000 per annum
per square kilometre for as long as the Group holds the special
mining licences and US$2,000 per
annum per square kilometre for so long as the Group holds the
mining licences for building materials. The total commitment for
2018 for the remaining special mining licences and mining licences
for building materials amount to US$0.62
million.
- Purchase commitments
At 31 December 2017, the Group had
purchase obligations for supplies and consumables of approximately
US$32.5 million (2016: US$47.0 million).
- Capital commitments
In addition to entering into various operational commitments in
the normal course of business, the Group entered into contracts for
capital expenditure of approximately US$10.2
million in 2017 (2016: US$13.0
million).
- 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 31 December 2017 the Group had
no loans of a funding nature due to or from related parties
(31 December 2016: zero).
- Post Balance Sheet Events
a) Sale of non-core mineral
royalty
As previously announced, Acacia has agreed to divest a non-core
royalty over the Houndé Mine in Burkina
Faso for total consideration of US$45
million. The 2% net smelter royalty has been owned by Acacia
and its predecessor companies since 2010. Following a competitive
process the royalty has been purchased by Sandstorm Gold Ltd, a
TSX- and NYSE-listed company. The transaction has closed following
all conditions being met and monies were received by Acacia in
January 2018.
b) Entry into further gold price
protection measures
As previously announced, Acacia has bought additional put
options covering 120,000 ounces of gold at a strike price of
US$1,320 per ounce for a cost of
US$2.0 million. The options will
expire in equal instalments of 30,000 ounces per month between
March and June. These options, in addition to those bought in
September 2017 at a strike price of
US$1,300 per ounce, provide a minimum
price for the majority of the Group’s expected production for the
first half of 2018 above our budgeted gold price of US$1,200 per ounce, with full upside exposure
should the gold price continue to trade above the respective strike
prices.
Reserves and Resources
Mineral reserves and mineral resources estimates contained in
this Report have been calculated as at 31
December 2017 in accordance with National Instrument 43-101
as required by Canadian securities regulatory authorities, unless
otherwise stated. Canadian Institute of Mining, Metallurgy and
Petroleum (‘CIM’) definitions were followed for mineral reserves
and resources. Calculations have been reviewed, verified (including
estimation methodology, sampling, analytical and test data) and
compiled by Acacia personnel under the supervision of Acacia
Qualified Persons: John Haywood,
Chief Geologist – Operations, and David
Blamires, Manager - Long Term Planning. However, the figures
stated are estimates and no assurances can be given that the
indicated quantities of metal will be produced. In addition, totals
stated may not add up due to rounding.
Mineral reserves have been calculated using an assumed long-term
average gold price of US$1,100 per
ounce, a silver price of US$15.00 per
ounce and a copper price of US$2.50
per pound. Reserve calculations incorporate current and/or expected
mine plans and cost levels at each property and reflect contained
ounces. Mineral resources at Acacia mines have been calculated
using an assumed long-term average gold price of US$1,400 per ounce, a silver price of
US$19.00 per ounce and a copper price
of US$2.80 per pound and reflect
contained metal.
Mineral resources at Acacia exploration properties have been
calculated using an assumed long-term average gold price of
US$1,500.00 per ounce for Tankoro and
Golden Ridge (however, this Mineral Resource has now been removed
from the declaration); whilst Nyanzaga is a foreign estimate
compiled to JORC Code 2012 and reported above a lower cut-off grade
of 1.5g/t. The new Mineral Resource estimate for the Liranda
Project in Kenya is reported above
varying lower cut-off grades appropriate for the mineralisation.
Resources have been estimated using varying cut-off grades,
depending on the type of mine or project, its maturity and ore
types at each property.
Reserve estimates are dynamic and are influenced by changing
economic conditions, technical issues, environmental regulations
and any other relevant new information and therefore these can vary
from year to year. Resource estimates can also change and tend to
be influenced mostly by new information pertaining to the
understanding of the deposit and secondly the conversion to ore
reserves. In addition, estimates of inferred mineral resources may
not form the basis of an economic analysis and it cannot be assumed
that all or any part of an inferred mineral resource will ever be
upgraded to a higher category. Therefore, investors are cautioned
not to assume that all or any part of an inferred mineral resource
exists, that it can be economically or legally mined, or that it
will ever be upgraded to a higher category. Likewise, investors are
cautioned not to assume that all or any part of measured or
indicated mineral resources will ever be upgraded to mineral
reserves.
See http://www.acaciamining.com/ for the Gold Reserves &
Resources Tables