Teranga Gold Corporation (TSX:TGZ)(ASX:TGZ) -
For a full explanation of Financial, Operating and Exploration
results please see the Interim Condensed Consolidated Financial
Statements as at and for the period ended September 30, 2012 and
the associated Management's Discussion & Analysis at
www.terangagold.com.
Highlights
-- Record third quarter profit of $21.3 million ($0.09 per share), compared
to a loss of $24.8 million ($0.10 loss per share) in the same prior year
period, an increase of $46.1 million.
-- Third quarter 2012 production totalled 55,107 ounces of gold, also a
Company record, and a 103 percent increase over the same quarter in
2011.
-- Third quarter 2012 total cash costs of $594 per ounce were 36 percent
lower than the same quarter in 2011.(1)
-- The Company remains on track to meet its full year production guidance
of 210,000 to 225,000 ounces at total cash costs of $600 to $650 per
ounce.
-- During the third quarter 2012, the Company delivered 29,000 ounces of
production into forward sales contracts, reducing the balance
outstanding to 93,395 ounces. The balance is expected to decline to
66,000 ounces at year end and be fully extinguished by August 2013.
-- Exploration at the Sabodala deposit Increases Measured and Indicated
Resources to 2.0 million ounces, an increase of approximately 670,000
ounces or 43 percent, before production (approximately 500,000 ounces
net of production).
-- Measured and Indicated Resources at Gora also increased to 374,000
ounces, an increase of approximately 160,000 ounces or 74 percent.
-- Initial Inferred Resources at Masato declared at approximately 700,000
ounces.
-- The Company's liquidity continues to improve, even as it extinguishes
its hedge book and lowers its payables balance, with $30.6 million in
cash, cash equivalents, and bullion receivable together with 4,150
ounces in bullion inventory at September 30, 2012 rising to $39.5
million, including $31.2 in cash and cash equivalents, at November 1,
2012.
"During the third quarter we continued to build out our
corporate and site management teams adding depth which I believe
will serve us well as we execute on our growth plans. One of the
keys to our success is the creation of a Technical Services Group
in our Corporate Office lead by Paul Chawrun. I am also very
pleased for Richard Young who has stepped into the CEO role, we
have worked together for over 20 years, and I am very much looking
forward to continuing to grow this Company with him over the coming
years", said Alan R. Hill, Executive Chairman.
(1) Total cash costs per ounce sold is a common financial
performance measure in the gold mining industry but has no standard
meaning under IFRS. For a definition of this metric, please see
page 8 of this press release.
Operating Highlights
-- Gold production for the third quarter of 2012 was 55,107 ounces, 103
percent higher than the same prior year period due to higher grade ore
processed combined with higher mill throughput as a result of the
completion of the mill expansion.
-- Gold sold for the three months ended September 30, 2012 totalled 62,439
ounces compared to 27,574 ounces sold in the same prior year period, an
increase of 126 percent. Ounces sold during the third quarter of 2012
were higher than produced due to the drawdown of gold in circuit from
the previous quarter when the mill had reduced ability to pour gold
during the tie-ins for the mill expansion. As a result, at September 30,
2012, gold in circuit and gold bullion inventory decreased by 7,337
ounces to 13,046 ounces.
-- Total cash costs for the three months ended September 30, 2012 were $594
per ounce sold compared to $928 per ounce in the same prior year period,
a reduction of 36 percent. Total cash costs and depreciation per ounce
sold were $810 per ounce for the three months ended September 30, 2012
compared to $1,168 per ounce in the same prior year period.(2)
-- Total tonnes mined for the three months ended September 30, 2012 were
more than 10 percent higher compared to the same prior year period due
to increased fleet capacity and improved productivity in the mining
operation.
-- Ore tonnes milled for the three months ended September 30, 2012 were 12
percent higher than the same prior year period mainly due to an increase
in mill capacity as a result of the completion of the mill expansion.
Throughput for the fourth quarter is expected to increase with
commissioning now complete and the end of the wet season which will
allow for better flow rates in the crushing circuit.
-- The Company remains on track to produce between 210,000 - 225,000 ounces
in 2012, an increase of approximately 65 percent over 2011, while total
cash costs are expected to decline approximately 20 percent to between
$600 to $650 per ounce, in line with guidance for the year. As a result
of the delay in completion and commissioning of the mill expansion
production is expected to be at the lower end of the range of our
production guidance for the year. Production for October was 22,735
ounces, during a month in which we transitioned from the wet to dry
season, keeping us on track to meet our production guidance for the full
year.
"Gross profit increased 298 percent for the third quarter and
130 percent year to date due to the improved operating performance
at Sabodala; resulting in a swing from a loss position a year ago
to profitability," said Richard Young, President and CEO.
Exploration Highlights
Exploration at the Sabodala deposit increases Measured and
Indicated Resources to 2.0 million ounces, an increase of
approximately 670,000 ounces or 43 percent, before production
(approximately 500,000 ounces net of production)
-- The 2012 drill program is designed to deepen the ultimate pit and, if
successful, to add upwards of 500,000 to 1 million ounces by mid-2013,
based on drilling intercepts to date, at grades between 1.5 gpt and 2
gpt.(3) Recent results in the third quarter of 2012 advanced the
mineralized extents at Sabodala to the NE, SE, SW and to depth in the
north, with the key in-pit drilling to extend the high grade intercepts
of a year ago still to come.
-- Measured Resources at the Sabodala pit total 27.1 million tonnes grading
1.25 gpt and Indicated Resources total 31.5 million tonnes grading 0.96
gpt. Inferred Resources total 12.4 million tonnes grading 0.87 gpt.
-- As a result of the mine planning work completed in the first quarter of
2012, we have focused the majority of the drilling effort this year into
expanding the Sabodala open pit reserves. During the third quarter of
2012, Reverse Circulation ("RC") and Diamond Drilling ("DD") on the Mine
License ("ML") totalled 22,000 metres at a cost of $7.0 million. Year to
date, a total of $20 million has been spent on just over 85,000 metres
of drilling. Based on the results to date, the budget for the ML has
been increased from $20 million to $25 million to continue with the
resource expansion and conversion program at the Sabodala pit.
Measured and Indicated Resources at Gora also increased to 374,000 ounces,
an increase of approximately 160,000 ounces or 74 percent.
-- The feasibility study is scheduled to be completed in the fourth quarter
2012 for submission before year end as part of the Environmental and
Social Impact Assessment.
-- Optimization work during the third quarter increased Measured and
Indicated Resources to 373,717 ounces of gold, an increase of
approximately 160,000 ounces or 74 percent over the previous estimate.
-- Measured Resources at the Gora deposit total 0.487 million tonnes
grading 5.27 gpt and Indicated Resources total 1.84 million tonnes
grading 4.93 gpt. Inferred Resources total 0.21 million tonnes grading
3.38 gpt. The increase in resources reflects the inclusion of all
outstanding assays and continued refinement of the resource model.
(2) Total cash costs per ounce sold and total cash costs and
depreciation per ounce sold are common financial performance
measures in the gold mining industry but have no standard meaning
under IFRS. For a definition of these metrics, please see page 8 of
this press release.
(3) This exploration target is not a Mineral Resource. The
potential quality and grade is conceptual in nature and there has
been insufficient exploration to define a Mineral Resource. It is
uncertain if further exploration will result in the determination
of a Mineral Resource.
Operational and Financial Highlights
Three months ended Nine months ended
September 30, September 30,
--------------------------------------------
2012 2011 2012 2011
restated restated
Operating results
Ore mined ('000t) 655 1,008 3,877 2,258
Waste mined ('000t) 6,242 5,085 17,688 17,082
Total mined ('000t) 6,897 6,093 21,565 19,340
Strip ratio waste/ore 9.5 5.0 4.6 7.6
Ore milled ('000t) 650 582 1,713 1,840
Head grade (g/t) 3.11 1.64 2.94 1.79
Recovery rate % 84.6 88.3 87.7 89.4
Gold produced (1) (oz) 55,107 27,082 142,506 94,766
Gold sold (oz) 62,439 27,574 136,210 102,471
Average realized
price received $/oz 1,290 1,174 1,489 1,152
Total cash cost
(incl.
royalties)(2) $/oz sold 594 928 629 773
Total depreciation
per ounce $/oz sold 216 241 210 253
Total production
cost per ounce $/oz sold 810 1,169 839 1,026
Mining (cost/t
mined) 2.7 2.6 2.6 2.2
Milling (cost/t
milled) 21.9 18.0 20.6 16.6
G&A (cost/t milled) 5.8 6.6 6.0 5.6
----------------------------------------------------------------------------
Financial results
(US$000)
Revenue 105,014 46,678 227,550 155,811
Cost of sales (51,033) (33,133) (116,021) (107,288)
Gross profit 53,981 13,545 111,529 48,523
Exploration and
evaluation
expenditures (2,041) (8,845) (13,958) (20,199)
Losses on gold hedge
contracts (18,981) (25,756) (24,299) (44,663)
Profit/(Loss)
attributable to
shareholders 21,336 (24,808) 31,143 (32,764)
----------------------------------------------------------------------------
As at September 30,
Financial position
(US$000) 2012 2011
Cash and cash
equivalents (3) 14,767 25,788
Net assets 315,250 299,272
Borrowings 75,038 17,306
Note (1): Gold produced includes change in gold in circuit inventory plus
gold recovered during the period.
Note (2): Total cash costs per ounce sold for three and nine months ended
September 30, 2011 were restated to comply with the Company's new accounting
policies for measuring and recording ore stockpile costs, and reporting
total cash costs after inventory movement, in line with the Company's
accounting policies and industry standards.
Note (3): Cash and cash equivalents include short term investments over 90
days and restricted cash.
Review of Operating Results
Mining
Total tonnes mined for the three and nine months ended September
30, 2012 were more than 10 percent higher compared to the same
prior year periods due to increased fleet capacity and improved
productivity in the mining operation. Drilling and loading
availabilities benefited from the addition of three new blast hole
drill rigs and four new haul trucks and implementation of better
maintenance practices. During the last few weeks of the third
quarter 2012, mining activities were negatively impacted by lower
haul truck availability due to delays in delivery of tires. This
issue was remediated subsequent to the period end with the delivery
of tires by the Mine's existing supplier and the sourcing of
additional tires via a new supplier. This may be an ongoing issue
for the Company and the industry over the next several quarters.
Year to date, fewer ore tonnes have been mined than planned but at
better grades (average grade mined was just under 2 gpt,
approximately 30 percent higher than the reserve model) resulting
in an increase in ounces mined compared to plan. In calculating
2011 year end reserves, Management lowered the capping level on
high grade intersections, resulting in an underestimation of grade
in this area of the ore body.
During the third quarter, the Company finalized the purchase of
five additional haul trucks and one shovel to accelerate the mining
rate of the Sabodala deposit which we expect will increase the
production rate in 2013 and beyond. Two of the new haul trucks are
expected before year end while the balance of three trucks and the
shovel are expected to be delivered and commissioned in the second
quarter of 2013.
Unit mining costs for the three and nine months ended September
30, 2012 were on plan but higher compared to the prior year periods
mainly due to higher fuel consumption due to longer haul distances
and higher costs for blasting consumables.
Milling
Ore tonnes milled for the three months ended September 30, 2012
were 12 percent higher than the same prior year period mainly due
to an increase in the mill capacity as a result of the completion
of the mill expansion. Mill throughput for the third quarter was
about 20 percent lower than plan mainly due to the delay in
completion and commissioning of the crushing circuit as part of the
mill expansion. Throughput for the fourth quarter is expected to
increase with commissioning now complete and the end of the wet
season which will allow for better flow rates in the crushing
circuit.
Ore tonnes milled for the nine months ended September 30, 2012
were 7 percent lower than the same prior year period mainly due to
harder ore in 2012 compared to the softer material that was
available in 2011 as well as due to the shutdowns relating to
tie-ins for the mill expansion during the second quarter, partially
offset by the increase in the milling capacity during the third
quarter.
Year to date, the average grade processed is higher than plan,
mainly due to better than planned mined grades and lower throughput
as a result of the delay in completion and commissioning of the
crushing circuit (highest grade material processed first).
Unit processing costs for the three months ended September 30,
2012 were 21 percent higher than the same prior year period
primarily due to higher consumption of Heavy Fuel Oil ("HFO") used
for power generation, higher costs and consumption of grinding
media, due to harder ore processed, and higher costs for reagents,
partly offset by lower HFO prices.
Unit processing costs for the nine months ended September 30,
2012 were 24 percent higher than the same prior year period
primarily due to lower throughput rates, higher consumption of
grinding media, due to harder ore processed, and higher reagent
costs, partly offset by lower HFO prices.
General and Administration
General and administration costs for the three and nine months
ended September 30, 2012 totaled $3.8 million and $10.4 million,
respectively, compared to $3.9 million and $10.3 million in the
same prior year periods.
Average Realized Gold Price(4)
During the third quarter 2012, 62,439 gold ounces were sold at
an average realized price of $1,290 per ounce with 29,000 ounces
delivered into gold hedge contracts at an average price of $831 per
ounce and 33,439 ounces sold at an average spot price of $1,688 per
ounce. During the same prior year period, 27,574 ounces were sold
at an average realized price of $1,174 per ounce with 16,615 ounces
delivered into gold hedge contracts at $846 per ounce and 10,959
ounces sold into the spot market at an average spot price of $1,673
per ounce. During the nine months ended September 30, 2012, 136,210
ounces were sold at an average realized price of $1,489 per ounce
with 29,000 ounces delivered into gold hedge contracts at $831 per
ounce and 107,210 ounces sold at an average spot price of $1,667
per ounce. During the same prior year period, 102,471 ounces were
sold at an average realized price of $1,152 per ounce with 53,615
ounces delivered into gold hedge contracts at $846 per ounce and
48,856 ounces sold at an average spot price of $1,489 per
ounce.
(4) Average realized price" is a financial measure with no
standard meaning under IFRS. For a definition of this metric,
please see page 8 of this press release.
Total Cash Costs(5)
Total cash costs for the third quarter 2012 were $37.1 million
compared to $25.6 million in the same prior year period. Total cash
costs for the three months ended September 30, 2012 were $594 per
ounce sold compared to $928 per ounce in the same prior year
period, a reduction of 36 percent. Total cash costs for the nine
months ended September 30, 2012 were $85.7 million or $629 per
ounce sold compared to $79.2 million or $773 per ounce sold in the
same prior year period. The decrease in cash costs per ounce sold
is due to higher ounces sold, partially offset by higher mining and
processing costs.
(5) Total cash costs per ounce sold is a common financial
performance measure in the gold mining industry but has no standard
meaning under IFRS. For a definition of this metric, please see
page 8 of this press release.
Review of Financial Results
Profit for the Period
Profit for the three and nine months ended September 30, 2012
was $21.3 million and $31.1 million, respectively, compared to
losses of $24.8 million and $32.8 million in the same prior year
periods. Earnings per share for the three and nine months ended
September 30, 2012 were $0.09 and $0.13, compared to losses of
$0.10 and $0.13 per share in the same prior year periods. The
increase in profit and earnings per share was primarily due to an
increase in gross profit from higher revenues, lower regional
exploration expenditures and lower unrealized gold hedge
losses.
Revenue
Gold revenue for the three and nine months ended September 30,
2012 was $105.0 million and $227.6 million, respectively, compared
to gold revenue of $46.7 million and $155.8 million for the same
prior year periods. The increase in gold revenue was driven by both
higher gold sales and higher spot gold prices.
Revenues exclude the impact of gold hedges, as realized losses
on ounces delivered into gold hedge contracts are classified within
realized and unrealized gains/losses on gold hedge contracts.
Cost of Sales
Three months ended Nine months ended
September 30, September 30,
------------------------------------------------------
2012 2011 2012 2011
------------------------------------------------------
Current Restated (i) Current Restated (i)
Mine production costs 36,830 30,423 102,985 85,628
Depreciation and
amortization 14,940 7,101 34,707 26,359
Royalties 3,121 1,334 6,802 4,483
Rehabilitation 9 92 13 351
Inventory movements (3,867) (5,817) (28,486) (9,533)
------------------------------------------------------
Total cost of sales 51,033 33,133 116,021 107,288
------------------------------------------------------
(i) The Company adopted changes to certain accounting policies
effective January 1, 2012 that have been retrospectively applied to
the three and nine months ended September 30, 2011. See "Interim
Condensed Consolidated Financial Statements - Change in Accounting
Policies
Mine production costs totaled $36.8 million and $103.0 million
for the three and nine months ended September 30, 2012,
respectively, compared to $30.4 million and $85.6 million for the
same prior year periods. Mine production costs increased mainly due
to higher tonnes mined and milled.
Depreciation and amortization for the three and nine months
ended September 30, 2012 totaled $14.9 million or $216 per ounce
sold and $34.7 million or $210 per ounce sold, respectively, in
comparison with $7.1 million or $241 per ounce sold and $26.4
million or $253 per ounce sold for the same prior year periods.
Higher total depreciation expense is due to an increase in ounces
sold compared to the prior year periods as well as the impact of
new mobile equipment purchased at the end of 2011 and the
completion of the mill expansion in the second quarter of this
year. Depreciation and amortization expense for the fourth quarter
2012 is expected to increase as gold production and sales increase
and will be similar on per ounce basis to the current quarter.
Royalties for the three and nine months ended September 30, 2012
increased to $3.1 million and $6.8 million, respectively, compared
to $1.3 million and $4.5 million in the same prior year periods due
to more ounces sold at higher spot gold prices. Royalties are
calculated at 3 percent of the average spot price of gold during
the periods.
Exploration and Evaluation Expenditures
Exploration and evaluation expenditures totaled $2.0 million and
$14.0 million for the three and nine months ended September 30,
2012 compared to $8.8 million and $20.2 million in the same prior
year periods reflecting regional exploration costs incurred during
the period related to drill programs as well as target
identification work underway. Exploration and evaluation
expenditures for 2012 are expected to total approximately $15
million, approximately $5 million less than was budgeted as
Management focuses its efforts on the conversion of resources to
reserves on the Mine License.
Gains/Losses on Gold Hedge Contracts
The loss on gold hedge contracts totaled $19.0 million for the
third quarter of 2012 compared to a loss of $25.8 million for the
third quarter of 2011. For the nine months ended September 30, 2012
and 2011 the loss on gold hedge contracts totaled $24.3 million and
$44.7 million, respectively. The decrease in losses for the three
months and nine months ended September 30, 2012 compared to the
same prior year periods is mainly due to deliveries into the gold
hedge book reducing the outstanding hedge position to 93,395 ounces
of gold as at September 30, 2012. The total mark-to-market loss on
the remaining 93,395 ounces of gold under gold hedge contracts
recorded as a financial derivative liability decreased to $90.6
million at September 30, 2012 as the average forward price of the
remaining contracts at $815 per ounce is marked to the quarter end
spot price of $1,782 per ounce.
Outlook
The Company remains on track to produce between 210,000 -
225,000 ounces in 2012, an increase of approximately 65 percent
over 2011, while total cash costs for the year are expected to
decline approximately 20 percent to between $600 to $650 per ounce,
in line with guidance for the year. As a result of the delay in
completion and commissioning of the mill expansion, production is
expected to be at the lower end of the range of our production
guidance for the year. Production for October was 22,735 ounces,
during a month in which we transitioned from the wet to dry season,
keeping us on track to meet our production guidance for the full
year.
The gold forward sales contracts declined during the third
quarter 2012 by 29,000 ounces to 93,395 ounces as at September 30,
2012. Forward sales contracts are expected to decline to 66,000
ounces at December 31, 2012 and are scheduled to be fully
extinguished by August 2013.
In total, between capitalized mine site exploration and regional
exploration expenditures, the Company expects to spend
approximately $40 million in calendar 2012, in line with guidance
for the year, however more is expected to be spent on conversion of
resources to reserves on the Mine License and less on the
systematic Regional Land Package exploration program.
Capital expenditures, excluding capitalized exploration costs,
for 2012 are expected to total $50 million, an increase of $10
million from our previous guidance in our second quarter 2012
report to shareholders and a $20 million increase over our original
guidance for the year. During the third quarter of 2012 the Company
finalized a contract to purchase additional mining equipment to
increase the mining rate in the Sabodala pit in the amount of $13.4
million, of which approximately $9 million is expected to be spent
this year. The equipment is intended to be financed by a new
equipment lease facility with Macquarie Bank Limited ("Macquarie")
which is expected to be finalized before year end. The new facility
will provide $50 million of equipment financing and will be used to
refinance the existing Societe Generale lease facility.
LIQUIDITY AND CAPITAL RESOURCES
As at September 30, 2012 the Company had cash and cash
equivalents of $14.8 million, bullion receivable of $15.8 million
and 4,150 ounces in gold bullion inventory (as at November 1, 2012:
the Company had $31.2 million in cash and cash equivalents and
approximately $8 million in bullion receivable). Cash balances
decreased from the June quarter end primarily due to a reduction in
the accounts payable balance and an increase in accounts receivable
due to the timing of gold shipments. Management believes that cash
and cash equivalents at September 30, 2012, together with expected
future cash flows from operations will improve the Company's
liquidity, and is expected to be sufficient to support the
Company's minimum operating requirements without the need for
additional equity financing. The gold forward sales contracts
declined during the third quarter 2012 by 29,000 ounces to 93,395
ounces as at September 30, 2012. Forward sales contracts are
expected to decline to 66,000 ounces at December 31, 2012 and are
scheduled to be fully extinguished by August 2013.
About half of the remaining 2012 capital expenditures, excluding
capitalized exploration costs, of $16 million are expected to be
financed by a new equipment lease facility with Macquarie which is
expected to be finalized before year end. The new facility will
provide $50 million of equipment financing and will be used to
refinance the existing Societe Generale lease facility.
In addition, the Company continues to review the merits of
various debt facilities to provide additional flexibility to
execute its growth strategy. Such incurrence of debt may be in the
form of one or more borrowings of bank or other similar loans.
There can, however, be no assurance that the Company will find the
terms on such debt reasonable and therefore may not put a new
facility in place.
PLANT EXPANSION
The new mill and downstream processing plant were commissioned
in the second quarter. The secondary crusher and new
stockpile/reclaim facilities were completed at the end of the
second quarter and commissioned in the third quarter this year.
Some redesign of chutes and screens is required before next years'
rainy season to improve ore flow rates in the crushing circuit
during rainy season.
MINE LICENSE EXPLORATION ("ML")
The primary objective of the 2012 drill program on the Sabodala
Mine License is to expand the Sabodala Mine open pit reserves. Pit
optimization work completed earlier this year defined a larger pit
shell that serves as a guide to our current drill program.
The 2012 drill program is designed to deepen the ultimate pit
and, if successful, to add upwards of 500,000 to 1 million ounces
by mid-2013, based on drilling intercepts to date, at grades
between 1.5 gpt and 2 gpt.(6) Recent results in the third quarter
of 2012 advanced the mineralized extents at Sabodala to the NE, SE,
SW and to depth in the north, with the key in pit drilling to
extend the high grade intercepts of a year ago still to come.
As at September 1, 2012, Measured and Indicated Resources at the
Sabodala pit have increased by approximately 0.7 million ounces to
2.0 million ounces, a 43 percent increase over Measured and
Indicated Resources reported as at December 31, 2011, before
production (approximately 500,000 ounces net of production).
Measured Resources at the Sabodala pit total 27.1 million tonnes
grading 1.25 gpt and Indicated Resources total 31.5 million tonnes
grading 0.96 gpt. Inferred Resources total 12.4 million tonnes
grading 0.87 gpt.
As a result of the mine planning work completed in the first
quarter of 2012, we have focused the majority of the drilling
effort this year into expanding the Sabodala open pit reserves.
During the third quarter of 2012, Reverse Circulation ("RC") and
Diamond drilling ("DD") on the ML totaled 22,000 meters at cost of
$7.0 million. Year to date, a total of $20 million has been spent
on just over 85,000 meters of drilling. Based on the results to
date, the budget for the ML has been increased from $20 million to
$25 million to continue with the resource expansion and conversion
program at the Sabodala pit.
(6) This exploration target is not a Mineral Resource. The
potential quality and grade is conceptual in nature and there has
been insufficient exploration to define a Mineral Resource. It is
uncertain if further exploration will result in the determination
of a Mineral Resource.
Masato
Drilling in 2011 delineated mineralization with an approximate
strike length of 500 metres and a down dip extent of 200 metres on
the Mine Lease property.
The objectives for Masato in 2012 include further definition
drilling by in-filling and extending the mineralized zones
identified in 2011. During the third quarter of 2012, five vein
models were generated based on geologic interpretations and assay
results, extending between 120 metres and 1,100 metres along
strike, and between 70 metres and 400 metres down dip. An initial
Inferred Resource is estimated at 19.2 million tonnes averaging
1.15 gpt gold, totaling approximately 700,000 ounces gold, above a
0.35 gpt Au cut-off.
REGIONAL EXPLORATION ("RLP")
There are currently 40 drill targets that have been identified
on the Company's approximately 1,330 km2 RLP, subject to the
ultimate renewal of Sabodala North West permit, all within trucking
distance of the mill. All 40 targets are expected to be drill
tested in 2012-2013. A further 20 targets have been evaluated with
surface sampling or trenching.
Due to the heavy wet season no drilling took place during the
third quarter of 2012. The drill rigs were shut down for servicing
or deployed to the ML program and this allowed the large backlog of
gold assays to be reduced.
For full drill results from our regional exploration program
please see the Company's website.
Gora
The feasibility study is expected to be completed in the fourth
quarter 2012 for submission before year end as part of the
Environmental and Social Impact Assessment. Optimization work
during the third quarter increased Measured and Indicated Resources
to 373,717 ounces of gold, an increase of approximately 160,000
ounces or 74 percent over the previous estimate. Measured Resources
at the Gora deposit total 0.487 million tonnes grading 5.27 gpt and
Indicated Resources total 1.84 million tonnes grading 4.93 gpt.
Inferred Resources total 0.21 million tonnes grading 3.38 gpt. The
increase in resources reflects the inclusion of all outstanding
assays and continued refinement of the resource model.
Saiensoutou
During third quarter 2012, results were received for the infill
Rotary Air Blast ("RAB") drilling program completed at Saiensoutou
during the second quarter. This program returned a number of
mineralized intercepts (greater than 0.2 gpt cut-off, Aqua Regia
Assays), which includes:
--------------------------------------------------
--------------------------------------------------
Saiensoutou
--------------------------------------------------
--------------------------------------------------
HOLE ID(1) FROM (m) INTERSECTION(2)
--------------------------------------------------
--------------------------------------------------
SARB0117 26 18m @ 0.6 g/t
--------------------------------------------------
--------------------------------------------------
SARB0120 2 20m @ 1 g/t
--------------------------------------------------
--------------------------------------------------
SARB0134 18 18m @ 1.5 g.t
--------------------------------------------------
--------------------------------------------------
SARB0145 10 6m @ 3 g/t
--------------------------------------------------
--------------------------------------------------
SARB0164 30 20m @ 2.3 g/t
--------------------------------------------------
--------------------------------------------------
SARB0163 32 10m @ 0.6 g/t
--------------------------------------------------
--------------------------------------------------
SARB0245 24 18m @ 0.9 g/t
--------------------------------------------------
--------------------------------------------------
SARB0248 8 14m @ 0.8 g/t
--------------------------------------------------
--------------------------------------------------
(1) Drill hole results are disclosed as they are received and due to
location and depth of holes, not all results are available at the
same time nor are they processed sequentially.
(2) True widths to be determined.
These gold intersections broadly cluster into three sub-parallel
NS trends, which extend for at least 1.2 km in strike length.
A program of 6,000 meters of RC drilling is scheduled for later
this year or early next year to allow first pass testing of these
gold bearing trends.
Toumboumba (Sabodala NW)
Toumboumba is a shear vein system hosted in the Falombou granite
and has the potential for a small, shallow, oxide deposit, located
10 km from the Sabodala mill. This prospect consists of 18
north-south to north-east trending gold anomalous zones identified
from RAB drilling during 2011.
During the third quarter 2012, this exploration permit reached
its natural expiration, and as of the date hereof has not yet been
renewed by the Senegalese Ministry of Mines. During the third
quarter Sabodala Mining Company, along with its joint venture
partner, applied for an extraordinary extension, pursuant to its
rights under the Senegalese Mining Code, for an additional renewal
based on discoveries made to date (most notably Toumboumba) and in
order to complete drilling on targets within the perimeter to
determine whether an economically feasible deposit exists within
its boundaries. A renewal of a reduced foot print of 90 km2 remains
under consideration by the Ministry of Mines.
NON-IFRS FINANCIAL MEASURES
The Company provides some non-IFRS measures as supplementary
information that management believes may be useful to investors to
explain Teranga's financial results.
"Average realized price" is a financial measure with no standard
meaning under IFRS. Management uses this measure to better
understand the price realized in each reporting period for gold and
silver sales. Average realized price excludes from revenues
unrealized gains and losses on non-hedge derivative contracts. The
average realized price is intended to provide additional
information only and does not have any standardized definition
under IFRS; it should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
IFRS. Other companies may calculate this measure differently.
"Total cash costs per ounce sold" is a common financial
performance measure in the gold mining industry but has no standard
meaning under IFRS. The Company reports total cash costs on a sales
basis. We believe that, in addition to conventional measures
prepared in accordance with IFRS, certain investors use this
information to evaluate the Company's performance and ability to
generate cash flow. Accordingly, it is intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with IFRS. The measure, along with sales, is considered to be a key
indicator of a Company's ability to generate operating earnings and
cash flow from its mining operations.
Total cash costs figures are calculated in accordance with a
standard developed by The Gold Institute, which was a worldwide
association of suppliers of gold and gold products and included
leading North American gold producers. The Gold Institute ceased
operations in 2002, but the standard is considered the accepted
standard of reporting cash cost of production in North America.
Adoption of the standard is voluntary and the cost measures
presented may not be comparable to other similarly titled measure
of other companies.
"Total depreciation per ounce sold" is a common financial
performance measure in the gold mining industry but has no standard
meaning under IFRS. It is intended to provide additional
information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
IFRS. Total cash costs per ounce sold and total depreciation per
ounce sold are calculated as follows:
Three months ended Nine months ended
September 30, September 30,
-----------------------------------------
2012 2011 2012 2011
-----------------------------------------
restated restated
Gold produced oz 55,107 27,082 142,506 94,766
Gold sold oz 62,439 27,574 136,210 102,471
Cost of sales (1) ($'000) 51,033 33,133 116,021 107,288
Less: depreciation and
amortization ($'000) (14,940) (7,101) (34,707) (26,359)
Less: realized oil hedge
gain ($'000) (444) (391) (1,572) (1,528)
Add: non-cash inventory
movement ($'000) 1,476 464 6,053 386
Less: other adjustments ($'000) (10) (528) (127) (593)
-----------------------------------------
Total cash costs ($'000) 37,115 25,577 85,668 79,194
-----------------------------------------
Total cash costs per
ounce sold $/oz 594 928 629 773
Depreciation and
amortization ($'000) 14,940 7,101 34,707 26,359
Non - cash inventory
movement ($'000) (1,476) (464) (6,053) (386)
-----------------------------------------
Total depreciation and
amortization ($'000) 13,464 6,637 28,654 25,973
-----------------------------------------
Total depreciation per
ounce sold $/oz 216 241 210 253
Total cash costs and
depreciation per ounce
sold $/oz 810 1,169 839 1,026
Note (1): Cost of sales include 3 percent royalty payable to the Government
of Senegal based on the value of gold shipments, evaluated at the spot
price on the shipment date.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF COMPREHENSIVE INCOME / LOSS
(Unaudited and in US$'000 except per share amounts)
Three months ended Nine months ended
September 30, September 30,
-------------------- ---------------------
2012 2011 2012 2011
Revenue 105,014 46,678 227,550 155,811
Cost of sales (51,033) (33,133) (116,021) (107,288)
-------------------- ---------------------
Gross profit 53,981 13,545 111,529 48,523
Exploration and evaluation
expenditures (2,041) (8,845) (13,958) (20,199)
Administration expenses (3,079) (3,312) (12,376) (9,062)
Share based compensation (1,295) (2,271) (3,676) (8,959)
Finance costs (3,031) (555) (4,978) (2,043)
Losses on gold hedge contracts (18,981) (25,756) (24,299) (44,663)
Gains/(losses) on oil hedge
contracts 361 (2,373) (308) (1,374)
Net foreign exchange (losses)/
gains (1,630) 2,983 (1,124) 4,273
Impairment of available for
sale financial asset - - (11,917) -
Other income 8 173 30 790
-------------------- ---------------------
(29,688) (39,956) (72,606) (81,237)
Profit/(loss) before income
tax 24,293 (26,411) 38,923 (32,714)
Income tax expense - - - (139)
-------------------- ---------------------
Profit/(loss) for the period 24,293 (26,411) 38,923 (32,853)
-------------------- ---------------------
Profit/(loss) attributable to:
Shareholders 21,336 (24,808) 31,143 (32,764)
Non-controlling interests 2,957 (1,603) 7,780 (89)
-------------------- ---------------------
Profit/(loss) for the period 24,293 (26,411) 38,923 (32,853)
Other comprehensive
income/(loss):
Exchange differences arising
on translation of Teranga
corporate entity - (4,805) (63) (2,807)
Change in fair value of
available for sale financial
asset,
net of tax 3,407 (412) 4,726 (4,414)
-------------------- ---------------------
Other comprehensive
income/(loss) for the period 3,407 (5,217) 4,663 (7,221)
Total comprehensive
income/(loss) for the period 27,700 (31,628) 43,586 (40,074)
-------------------- ---------------------
Total comprehensive
income/(loss) attributable
to:
Shareholders 24,743 (30,025) 35,806 (39,985)
Non-controlling interests 2,957 (1,603) 7,780 (89)
Total comprehensive
income/(loss) for the period 27,700 (31,628) 43,586 (40,074)
-------------------- ---------------------
Earnings/(losses) per share
from operations
attributable to the
shareholders of the Company
during the period
- basic earnings/(losses) per
share 0.09 (0.10) 0.13 (0.13)
- diluted earnings/(losses)
per share 0.09 (0.10) 0.13 (0.13)
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF FINANCIAL POSITION
(Unaudited and in US$'000)
As at September As at December
30, 2012 31, 2011
Current assets
Cash and cash equivalents 14,767 7,470
Short-term investments - 593
Restricted cash - 3,004
Trade and other receivables 18,900 20,447
Inventories 71,363 48,365
Financial derivative assets 940 2,288
Other assets 6,490 12,751
Available for sale financial assets 13,115 19,800
----------------- ------------------
Total current assets 125,575 114,718
Non-current assets
Inventories 43,640 31,942
Financial derivative assets - 532
Property, plant and equipment 251,825 238,510
Mine development expenditure 106,608 89,825
Intangible assets 1,501 1,085
----------------- ------------------
Total non-current assets 403,574 361,894
----------------- ------------------
Total assets 529,149 476,612
----------------- ------------------
Current liabilities
Trade and other payables 38,202 43,238
Borrowings 14,878 16,468
Financial derivative liabilities 90,556 79,241
Provisions 1,960 1,954
----------------- ------------------
Total current liabilities 145,596 140,901
----------------- ------------------
Non-current liabilities
Financial derivative liabilities - 50,318
Provisions 10,073 9,215
Borrowings 58,230 7,509
----------------- ------------------
Total non-current liabilities 68,303 67,042
----------------- ------------------
Total liabilities 213,899 207,943
----------------- ------------------
Equity
Issued capital 305,412 305,412
Foreign currency translation reserve (998) (935)
Equity-settled share based compensation
reserve 15,594 12,599
Investment revaluation reserve 3,407 (1,319)
Accumulated losses (12,232) (43,375)
----------------- ------------------
Equity attributable to shareholders 311,183 272,382
Non-controlling interests 4,067 (3,713)
Total equity 315,250 268,669
----------------- ------------------
Total equity and liabilities 529,149 476,612
----------------- ------------------
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF CHANGES IN EQUITY
(Unaudited and in US$'000)
Nine months Nine months
ended ended
September 30, September 30,
2012 2011
Issued capital
At January 1 305,412 305,502
Share issue cost - (90)
----------------------------------------------------------------------------
At September 30 305,412 305,412
----------------------------------------------------------------------------
Foreign currency translation reserve
At January 1 (935) 1,011
Exchange difference arising on
translation of Teranga corporate entity (63) (2,807)
----------------------------------------------------------------------------
At September 30 (998) (1,796)
----------------------------------------------------------------------------
Equity-settled share based compensation
reserve
At January 1 12,599 1,733
Equity-settled share based compensation
reserve 2,995 9,106
----------------------------------------------------------------------------
At September 30 15,594 10,839
----------------------------------------------------------------------------
Investment revaluation reserve
At January 1 (1,319) (940)
Change in fair value of available for
sale financial asset 4,726 (4,414)
Impairment - -
----------------------------------------------------------------------------
At September 30 3,407 (5,354)
----------------------------------------------------------------------------
Accumulated losses
At January 1 (43,375) (34,332)
Profit/(loss) attributable to
shareholders 31,143 (32,764)
----------------------------------------------------------------------------
At September 30 (12,232) (67,096)
----------------------------------------------------------------------------
Non-controlling interests
At January 1 (3,713) (7,637)
Non-controlling interest - portion of
profit for the period 7,780 (89)
----------------------------------------------------------------------------
At September 30 4,067 (7,726)
----------------------------------------------------------------------------
Total equity at September 30 315,250 234,279
----------------------------------------------------------------------------
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF CASH FLOW
(Unaudited and in US$'000)
Three months ended Nine months ended
September 30, September 30,
-------------------- --------------------
2012 2011 2012 2011
Cash flows related to operating
activities
Profit/(loss) for the period 24,293 (26,411) 38,923 (32,853)
Depreciation of property, plant
and equipment 12,049 5,111 27,539 19,457
Depreciation of capitalized mine
development costs 3,046 2,023 7,456 7,200
Amortization of intangibles 153 104 451 341
Amortization of borrowing costs 342 68 561 221
Unwinding of discount 23 - 68 -
Share based compensation 1,295 2,271 3,676 8,959
Net change in (gains)/losses on
gold hedge (5,320) 11,540 (2) 7,335
Net change in losses on oil
hedge 82 2,763 1,880 2,903
Buyback of gold hedge sales
contracts - - (39,000) -
Income tax paid - - - 139
Impairment of available for sale
financial asset - - 11,917 -
Changes in working capital (35,813) (9,494) (37,423) (15,535)
-------------------- --------------------
Net cash provided by/(used in)
operating activities 150 (12,025) 16,046 (1,833)
Cash flows related to investing
activities
Decrease in restricted cash - - 3,004 -
Redemption of short-term
investments - 2,437 592 85
Expenditures for property, plant
and equipment (6,318) (19,059) (32,892) (37,988)
Expenditures for mine
development (7,432) (4,590) (24,239) (9,707)
Acquisition of intangibles (464) (393) (867) (1,005)
-------------------- --------------------
Net cash used in investing
activities (14,214) (21,605) (54,402) (48,615)
Cash flows related to financing
activities
Proceeds from issuance of
capital stock, net of issue
costs - - - (491)
Loan facility, net of borrowing
cost paid - - 57,977 -
Repayment of borrowings (4,532) (2,799) (12,265) (6,299)
Draw down from finance lease
facility, net of financing cost
paid - - 2,862 -
Interest paid on borrowings (1,791) (229) (2,343) (676)
-------------------- --------------------
Net cash (used in)/provided by
financing activities (6,323) (3,028) 46,231 (7,466)
Effect of exchange rates on cash
holdings in foreign currencies (405) (934) (578) 188
-------------------- --------------------
Net increase / (decrease) in
cash and cash equivalents held (20,792) (37,592) 7,297 (57,726)
Cash and cash equivalents at the
beginning of financial period 35,559 55,699 7,470 75,833
-------------------- --------------------
Cash and cash equivalents at the
end of financial period 14,767 18,107 14,767 18,107
-------------------- --------------------
CORPORATE DIRECTORY
Directors
Alan Hill, Executive Chairman
Richard Young, President and CEO
Christopher Lattanzi, Non-Executive Director
Oliver Lennox-King, Non-Executive Director
Alan Thomas, Non-Executive Director
Frank Wheatley, Non-Executive Director
Senior Management
Alan Hill, Executive Chairman
Richard Young, President and CEO
Mark English, Vice President, Sabodala Gold Operations
Paul Chawrun, Vice President Technical Services
Navin Dyal, Vice President and CFO
David Savarie, Vice President, General Counsel & Corporate Secretary
Kathy Sipos, Vice President, Investor & Stakeholder Relations
Macoumba Diop, General Manager and Government Relations Manager, SGO
Martin Pawlitschek, Regional Exploration Manager, SMC
Bruce Van Brunt, Business Development Manager, SGO
Registered Office
121 King Street West, Suite 2600
Toronto, Ontario, M5H 3T9, Canada
T: +1 416-594-0000
F: +1 416-594-0088
E: generalmailbox@terangagold.com
W: http://www.terangagold.com/
Senegal Office
2K Plaza
Suite B4, 1er Etage
sis la Route due Meridien President
Dakar Almadies
T: +221 338 693 181
F: +221 338 603 683
Auditor
Deloitte & Touche LLP
Share Registries
Canada: Computershare Trust Company of Canada
T: +1 800 564 6253
Australia: Computershare Investor Services Pty Ltd
T: 1 300 850 505
Stock Exchange Listings
Toronto Stock Exchange, TSX symbol: TGZ
Australian Securities Exchange, ASX symbol: TGZ
FORWARD LOOKING STATEMENTS
Certain information included in this management discussion and
analysis, including any information as to the Company's strategy,
projects, exploration programs, joint venture ownership positions,
plans, future financial or operating performance and other
statements that express management's expectations or estimates of
future performance, constitute "forward-looking statements". The
words "believe", "expect", "will", "intend", "anticipate",
"project", "plan", "estimate", "on track" and similar expressions
identify forward looking statements. Such forward- looking
statements are necessarily based upon a number of estimates,
assumptions, opinions and analysis made by management in light of
its experience that, while considered reasonable, may turn out to
be incorrect and involve known and unknown risks, uncertainties and
other factors, in each case that may cause the actual financial
results, performance or achievements of the Company to be
materially different from the Company's estimated future results,
performance or achievements expressed or implied by those
forward-looking statements. Such forward-looking statements are not
guarantees of future performance.
These assumptions, risks, uncertainties and other factors
include, but are not limited to: assumptions regarding general
business and economic conditions; conditions in financial markets
and the future financial performance of the company; the impact of
global liquidity and credit availability on the timing of cash
flows and the values of assets and liabilities based on projected
future cash flows; the supply and demand for, deliveries of, and
the level and volatility of the worldwide price of gold or certain
other commodities (such as silver, fuel and electricity);
fluctuations in currency markets, including changes in U.S. dollar
and CFA Franc interest rates; risks arising from holding derivative
instruments; adverse changes in our credit rating; level of
indebtedness and liquidity; ability to successfully complete
announced transactions and integrate acquired assets; legislative,
political or economic developments in the jurisdictions in which
the Company carries on business; operating or technical
difficulties in connection with mining or development activities;
employee relations; availability and costs associated with mining
inputs and labor; the speculative nature of exploration and
development, including the risks of obtaining necessary licenses
and permits and diminishing quantities or grades of reserves;
changes in costs and estimates associated with our projects; the
accuracy of our reserve estimates (including with respect to size,
grade and recoverability) and the geological, operational and price
assumptions on which these are based; contests over title to
properties, particularly title to undeveloped properties; the risks
involved in the exploration, development and mining business, as
well as other risks and uncertainties which are more fully
described in the Company's A.I.F. and in other Company filings with
securities and regulatory authorities which are available at
www.sedar.com. Accordingly, readers should not place undue reliance
on such forward looking statements. Teranga expressly disclaims any
intention or obligation to update or revise any forward looking
statements, whether as a result of new information, future events
or otherwise, except in accordance with applicable securities
laws.
COMPETENT PERSONS STATEMENT
The technical information in this quarterly report that relates
to exploration results and mineral resource estimates within the
Mining License is based on information compiled by Mr. Bruce Van
Brunt, who is a Fellow of the Australasian Institute of Mining and
Metallurgy. Mr. Van Brunt is a full time employee of Teranga and
not independent. Mr. Van Brunt has sufficient experience relevant
to the style of mineralisation and type of deposit under
consideration and to the activity he is undertaking to qualify as a
"Competent Person" as defined in the 2004 Edition of the
"Australasian Code of Reporting of exploration Results, Mineral
Resources and Ore Reserves". Mr. Van Brunt is a "Qualified Person"
in accordance with National Instrument 43-101 and he consents to
the inclusion of this information in the form and context in which
it appears in this announcement.
The technical information in this quarterly report that relates
to the exploration results and targets within the regional
exploration program are based on information compiled by Mr. Martin
Pawlitschek, who is a member of the Australian Institute of
Geoscientists. Mr. Pawlitschek is our full time employee and is not
"independent" within the meaning of National Instrument 43-101. Mr.
Pawlitschek has sufficient experience relevant to the style of
mineralization and type of deposit under consideration and to the
activity he is undertaking to qualify as a Competent Person as
defined in the 2004 Edition of the "Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves". Mr.
Pawlitschek is a "Qualified Person" in accordance with NI 43-101
and he consents to the inclusion of this information in the form
and context in which it appears in this offering memorandum.
Contacts: Teranga Gold Corporation Kathy Sipos Vice President of
Investor & Stakeholder Relations +1
416-594-0000ksipos@terangagold.com www.terangagold.com