TIDMABG
AFRICAN BARRICK GOLD
30 October 2013
Results for the three months ended 30 September 2013 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
African Barrick Gold plc ("ABG") reports third quarter results
"I am delighted to present a strong set of operational results in my first
report as CEO of ABG. The continued focus on operational delivery and the
implementation of cost saving programmes across the group has resulted in our
strongest quarter this year", said Brad Gordon, Chief Executive Officer of
African Barrick Gold. "I am impressed with the quality of our assets, the
initiatives implemented to date and the people at our operations. We need to
continue and deepen this operational discipline to ensure that we achieve
sustainable cash generation. We now expect to exceed the upper end of the
production guidance range of 600,000 ounces for 2013, with the resultant cash
cost per ounce being below the lower end of guidance of US$925 per ounce sold."
Third Quarter Highlights
ABG reports net earnings of US$17.8 million (US4.3 cents per share) with
adjusted net earnings2 of US$39.1 million (US9.5 cents per share), after
one-off adjustments mainly relating to the Tulawaka closure and the Operational
Review. Operational cash flow was US$39.9 million.
Other significant highlights include:
Q3 gold production1 of 164,719 ounces up 11% on Q3 2012
Cash costs2 of US$730 per ounce sold, 28% lower than Q3 2012
Revenue of US$221.1 million and EBITDA of US$64.8 million
All-in sustaining costs2 of US$1,275 per ounce sold, down 25% on Q3 2012
Cash balance of US$289 million as at 30 September 2013
On track to deliver target of over US$100 million in cost reductions by the end
of 2013
Bulyanhulu CIL Expansion project remains on track for first production in Q1
2014
Operational Review Update
We have continued to make good progress on the implementation of the
Operational Review and have continued to see a strong downward trend in both
our cash costs and all-in sustaining costs, which were down 17% and 7%
respectively on Q2 2013 and 28% and 25% respectively on Q3 2012. A revamped
management team has been appointed to accelerate and deepen the Operational
Review and ensure a continued focus on effectively managing our cost base going
forward.
Progress has been made in each of the below areas:
Operating cost reductions - Of the US$95 million of savings targeted, we remain
on track to achieve the planned 30% in 2013, with US$21 million saved to date
on an annualised basis. Major savings to date have been in maintenance, camp
services, consumables and security.
Capital discipline - Achieved US$27 million of sustaining capital savings to
date against the same period in 2012 and continue to expect to achieve the
balance of the previously communicated saving of US$50 million by year end.
Organisational structure - Significant changes to staffing structures and
levels resulting in a reduction of 27% of international employees year to date
and a reduction of 37% in contractors on site.
Corporate overhead cost reductions - To date, savings of US$12 million have
been realised through simplifying the corporate structure and reducing the
support offices. A further saving of US$3 million is expected to be achieved in
Q4 2013, in line with the overall target of $15 million for 2013.
Exploration - We have so far achieved US$18 million of our targeted savings of
US$25 million for 2013.
Mine planning deliverability - Following the optimisation of the Buzwagi mine
plan last quarter, we have decided to defer Gokona Cut 3 at North Mara,
representing 628koz of the mine's reported reserves, while we finalise the
feasibility study into the alternative of mining out this reserve and
additional identified resource through an underground operation.
Key statistics
Three months ended 30 Nine months ended 30
September September
(Unaudited) 2013 20124 2013 20124
Tonnes mined (thousands of tonnes) 13,388 12,992 42,530 34,359
Ore tonnes mined (thousands of tonnes) 1,697 1,514 5,099 4,804
Ore tonnes processed (thousands of tonnes) 2,114 1,890 6,162 5,632
Process recovery rate (percent) 88.3% 89.5% 88.6% 87.6%
Head grade (grams per tonne) 2.7 2.7 2.7 2.8
Attributable gold production (ounces)1 164,719 147,786 476,557 445,528
Attributable gold sold (ounces)1 161,631 147,026 481,565 449,667
Copper production (thousands of pounds) 2,838 2,483 8,422 8,609
Copper sold (thousands of pounds) 2,448 2,325 8,561 8,284
Cash cost per tonne milled (US$)2 56 79 66 75
Per ounce data (US$)
Average spot gold price3 1,326 1,652 1,456 1,652
Average realised gold price2 1,310 1,688 1,423 1,657
Total cash cost2 730 1,012 845 934
All-in sustaining cost2 1,275 1,709 1,429 1,563
Average realised copper price (US$/pound) 3.20 3.88 3.22 3.63
Financial results
Three months ended 30 Nine months ended 30
September September
(Unaudited) 2013 20124 2013 20124
(US$'000)
Revenue 221,145 264,927 720,897 799,395
Cost of sales (158,650) (205,231) (573,534) (579,968)
Gross profit 62,495 59,696 147,363 219,427
Corporate administration5 (9,593) (13,278) (24,502) (38,264)
Exploration and evaluation costs (3,449) (7,314) (11,003) (17,698)
Corporate social responsibility expenses (3,243) (2,963) (10,162) (9,713)
Impairment charges - - (927,690) -
Other charges (12,625) (418) (34,717) (4,693)
Profit/ (loss) before net finance cost 33,585 35,723 (860,711) 149,059
Finance income 81 595 1,086 1,674
Finance expense5 (2,417) (2,427) (7,192) (7,740)
Profit/ (loss) before taxation 31,249 33,891 (866,817) 142,993
Tax (expense)/ credit (15,921) (10,436) 168,727 (45,458)
Net profit / (loss) for the period 15,328 23,455 (698,090) 97,535
Attributed to:
- Non-controlling interests (2,502) (367) (14,690) 3
- Owners of the parent (net earnings/
(loss)) 17,830 23,822 (683,400) 97,532
Other Financial information
Three months Nine months ended
ended 30 30
September September
(Unaudited, in US$'000 unless otherwise stated) 2013 20124 2013 20124
EBITDA2,5 64,769 76,726 195,541 261,143
Adjusted EBITDA2,5 77,508 76,726 217,414 261,143
Net earnings / (loss) 17,830 23,822 (683,400) 97,532
Earnings / (loss) per share (EPS) (cents) 4.3 5.8 (166.6) 23.8
Adjusted net earnings2 39,052 23,822 78,386 97,532
Adjusted net earnings per share (AEPS) (cents)2 9.5 5.8 19.1 23.8
Dividend per share (cents) - - 1.0 4.0
Cash and cash equivalents 288,663 452,447 288,663 452,447
Cash generated from operating activities 39,851 45,259 138,922 172,361
Operating cash flow per share (cents)2 9.7 11.0 33.9 42.0
Capital expenditure6 83,040 82,087 269,968 223,786
Draw down of long term debt (Borrowings) 30,000 - 110,000 -
1 Production and sold ounces reflect equity ounces which exclude 30% of
Tulawaka's production and sales base.
2Average realised gold price, total cash cost per ounce, all-in sustaining cost
per ounce, cash cost per tonne milled, EBITDA, adjusted EBITDA, adjusted net
earnings, adjusted net earnings per share and operating cash flow per share are
non-IFRS financial performance measures with no standard meaning under IFRS.
Refer to "Non IFRS measures"' on page 11 for definitions.
3Reflect the London PM fix price.
4Restated for the impact of capitalised stripping due to the adoption of IFRIC
20.
5 Three and nine months ended 30 September 2012 restated to reclassify bank
charges from corporate administration to finance expense.
6Includes non-cash reclamation asset adjustments and finance lease purchases in
2012.
Third Quarter Review
During the third quarter we saw continued strong performance at both Buzwagi
and North Mara with production up 47% and 28% respectively on Q3 2012. At
Bulyanhulu, we continued to progress the recovery plan, delivering production
of 52,126 ounces, broadly in line Q2 2013, but 8% down on Q3 2012 due to lower
throughput.
Buzwagi continued to show strong year on year improvements on all key operating
metrics as it began to implement the new mine plan. Head grade was 17% higher
than in Q3 2012 due to the impact of the re-engineered mine plan focusing on
higher return areas. When combined with mill throughput, which was up 31% on Q3
2012, we achieved production of 44,408 ounces, a 47% increase on Q3 2012.
At North Mara, mining continued from higher grade zones in the Gokona pit
resulting in a head grade of 3.4 grams per tonne (g/t). Increased throughput
offset a decrease in mill recovery rates to 86.9%, predominantly as a result of
inconsistency experienced in the oxygen plant during the quarter. As a result,
production for the quarter amounted to 67,895 ounces, an increase of 28% on Q3
2012.
At Bulyanhulu, reduced equipment availability and access to stopes resulted in
a 3% decrease in ore tonnes hoisted, which, combined with plant maintenance
resulted in throughput being 9% lower than in Q3 2012. This resulted in
production of 52,126 ounces for the quarter, an 8% decrease on Q3 2012.
Total tonnes mined amounted to 13.4 million tonnes, an increase of 3% on Q3
2012, driven by increased mining rates at North Mara, which was partially
offset by lower mining rates at Buzwagi due to the change in mine plan.
Ore tonnes mined of 1.7 million tonnes were 12% higher than in Q3 2012 as a
result of the increase in ore tonnes mined at North Mara and at Buzwagi.
Ore tonnes processed amounted to 2.1 million tonnes, an improvement of 12% on
Q3 2012. Increased throughput at Buzwagi, achieved as a result of a stable
power supply and process plant improvements, was partially offset by lower
throughput at Tulawaka due to the closure of the site, and at Bulyanhulu due to
insufficient ore from underground.
Group head grade for the quarter of 2.7 g/t was in line with Q3 2012. The
increased grade from Gokona at North Mara was offset by an increased proportion
of group throughput being at Buzwagi at a lower grade.
Total cash costs of US$730 per ounce sold were 28% lower than Q3 2012. The
decrease was primarily due to decreased labour costs as a result of the
Operational Review (US$48/oz), lower site G&A costs (US$29/oz) and lower
maintenance costs, achieved as a result of the reduction in mining activity at
Buzwagi and our ongoing general focus on cost cutting and improved maintenance
scheduling (US$21/oz). In addition, cash costs benefitted from increased
capitalised stripping and a drawdown of low cost inventories (US$99/oz).
All-in sustaining cost per ounce sold ("AISC") of US$1,275 was 25% lower than
Q3 2012, driven by lower cash costs, corporate administration costs,
exploration costs and sustaining capital expenditures combined with a higher
production base. This was partially offset by the increase in capitalised
development expenditures.
Cash cost per tonne milled of US$56 decreased by 29% on Q3 2012 (US$79 per
tonne), primarily as a result of the above factors and the increased group
throughput.
Gold sales amounted to 161,631 ounces, an increase of 10% on Q3 2012, and 2%
lower than production for the quarter due to the timing of shipments at quarter
end.
Copper production for the quarter of 2.8 million pounds was 14% higher than in
Q3 2012. Increased production at Buzwagi was partially offset by lower
production at Bulyanhulu.
Revenue of US$221.1 million was 17% lower than Q3 2012 as the increase in gold
sales achieved for the quarter was more than offset by a 22% decrease in the
average realised gold price (US$1,310 per ounce sold for Q3 2013 when compared
to US$1,688 per ounce sold in Q3 2012). Realised prices were below the average
gold price for the quarter due to sales being skewed towards the end of the
quarter when the gold price was lower.
EBITDA of US$64.8 million was 16% lower than Q3 2012 as a result of increased
other charges of US$12.2 million due to the allocation of non-operational
Tulawaka costs, including retrenchments, costs associated with the Operational
Review and increased unrealised losses on currency hedges not qualifying for
hedge accounting. Adjusted EBITDA of US$77.5 million was in line with Q3 2012.
Capital expenditure for the quarter amounted to US$83.0 million, in line with
that of Q3 2012 (US$82.1 million). Key capital expenditures included the
Bulyanhulu CIL Expansion project (US$18.1 million), capitalised stripping at
Buzwagi and North Mara (US$31.0 million), capitalised underground development
at Bulyanhulu (US$10.6 million) and group sustaining capital investments in
mining equipment, plant and tailings and infrastructure of US$19.4 million.
Other developments
Operational Review
We have made good progress on the implementation of the US$185 million of cost
savings outlined in the Operational Review in July and remain on track to
deliver our target of over US$100 million in cost reductions by the end of
2013. The delivery on the cost savings is highlighted by the consistent
reduction in our AISC over the year to date whilst delivering strong
production. Progress against each of the key areas of the Operational Review is
detailed below:
1. Operating cost reductions - US$95 million
Of the US$95 million of savings targeted, we remain on track to achieve the
planned run rate of 30% by the end of 2013, with US$21 million savings achieved
to date on an annualised basis. The balance of the US$95 million is expected to
be achieved by the end of 2014. Key highlights in each operating cost area are:
Labour structure and controls - reduction of up to 20% on 2012
Reduction of international workers at Buzwagi from 148 to 51 at as the end of
Q3 2013
Across the group we have seen a reduction of 37% in contractors on site year to
date
Procurement - reduction of 5-10% on 2012
Renegotiation of a consumable contract which is expected to realise annual
savings in excess of US$1.2 million
Improved pricing standardisation across sites
Maintenance - reduction of 5-10% on 2012
Year to date saving of 7% in process plant maintenance due to improved
scheduling
Reduction in the reliance on original equipment manufacturers for non-critical
spares
Aviation, Camp Services, Travel, Vehicles and Administration - reduction of
30-40% on 2012
Reduction of inter-site aviation schedule from 6 days to 5 days a week
Improved cost control in respect of travel bookings as well as camp and meal
administration
Consumables - reduction of 5-10% on 2012
Implementation of short interval controls in the CIL and detoxification plants
to reduce cyanide usage
Feasibility study for an in-house tyre repair workshop near completion
Contract Management and External Services - reduction of 5-10% on 2012
Renegotiation of several major service contracts concluded which will result in
annual savings of US$6.8 million
Revised contract administration procedures to improve rates and contractor
performance
Security - reduction of 15-20% on 2012
33% reduction in number of international employees within the security function
In-sourcing of related services and a reduction of contractors on site
2. Capital discipline - US$50 million
Achieved US$27 million of sustaining capital savings to date against the same
period in 2012 and continue to expect to achieve the balance of the previously
communicated saving of US$50 million by year end.
3. Corporate overhead cost reductions - US$15 million
Progress has been made on the simplification of the corporate structure and the
reduction in size of our support offices, with US$12 million of the planned
savings made year to date. The number of staff in our corporate offices has
already been reduced by 30% which has the further benefit of reducing travel
and expense costs. We remain on track to complete the full savings of US$15
million by the end of 2013.
4. Exploration - US$25 million
As previously announced we have scaled back our exploration activities in 2013,
resulting in a targeted cost saving of US$25 million when compared to 2012.
Year to date we have achieved a saving of approximately US$18 million as we
have focused our exploration programme on potential high return programmes at
Bulyanhulu and on two targets in the North Mara region. In Kenya we are
undertaking extensive low cost sampling and testing of anomalies in order to
prepare for future programmes.
5. Mine planning deliverability
In addition to the review of our operating costs, we are reviewing our life of
mine plans at each operation and the options available to ABG to enhance cash
flow generation in the near term. At Buzwagi we have updated the life of mine
plan to focus on cash flow generation and are currently mining to that plan.
At North Mara, we have decided to defer Gokona Cut 3, which contains 628koz of
North Mara's reserve base, while we finalise the feasibility study into the
alternative of mining out this reserve and additional identified resource
through an underground operation. We expect to complete this study by the
middle of 2014.
At Bulyanhulu, the first stage in the future development of the mine, the CIL
Expansion, remains on budget and on time for first production in Q1 2014. As
part of the review of the life of mine of the underground we are assessing the
timing of the Upper East Acceleration and have commenced a deep drilling
exploration campaign to assess potential extension of the mineralisation to the
West of the ore body.
Senior Leadership Team changes
During the quarter there were a number of management changes designed to
strengthen the leadership team and ensure continued delivery of the Operational
Review. Brad Gordon was appointed Chief Executive Officer in August 2013 and
brings over 30 years of operational experience. Since his appointment Brad has
also taken day-to-day oversight of operations following the departure of the
former COO, Marco Zolezzi. A replacement as COO will be appointed in due
course. Andrew Wray, formerly Head of Corporate Development and Investor
Relations was also appointed as Chief Financial Officer (CFO) in September
2013. Jaco Maritz, who had been Acting CFO since March 2013, has resumed his
responsibilities as Vice President, Finance.
Tulawaka Closure Process
At Tulawaka, we continued with the closure process of the mine. This resulted
in incidental production of 289 ounces for the quarter as the process plant was
closed. We are finalising discussions with the Government on the ultimate
future use of the site, and hope to conclude these by the end of the year.
Taxation
During Q3 2013 working capital continued to be adversely affected by the build
up in the indirect tax receivable which has been driven by the abolition of VAT
Relief in Q4 2012 in contravention of our Mineral Development Agreements.
During the quarter the receivable increased by US$22.4 million and the total
indirect tax receivable build up since Q4 2012 amounted to US$98.4 million as
at 30 September 2013. Post period end we received a VAT refund of US$4.8
million against this amount and will be pursuing further refunds. We have also
set up an escrow arrangement for VAT Imports in order to address ongoing
monthly payments in order to prevent a further build up of the amount. We
continue to discuss a similar agreement for VAT levied on domestic goods which
represent approximately 50% of monthly payments.
Post period end we received a demand from the Tanzanian Revenue Authority
amounting to US$81 million for payment of with-holding tax on historic offshore
dividend payments to shareholders. Management do not believe this is a valid
demand and we will vigorously defend our position.
Outlook
Over the past nine months we have delivered improved performance from our
operating portfolio as a result of a continued focus on operational delivery
and cost control. We believe we are well positioned to continue the reduction
in our all in sustaining costs in the fourth quarter and into 2014.
We now expect full year production to exceed the higher end of guidance of
600,000 ounces with the resultant cash cost per ounce being below the lower end
of guidance of US$925 per ounce sold.
African Barrick Gold plc +44 (0) 207 129 7150
Brad Gordon, Chief Executive Officer
Andrew Wray, Chief Financial Officer
Giles Blackham, Investor Relations Manager
Bell Pottinger +44 (0) 207 861 3232
Charlie Vivian
Daniel Thöle
About ABG
ABG is Tanzania's largest gold producer and one of the five largest gold
producers in Africa. We have three producing mines, all located in Northwest
Tanzania, and several exploration projects at various stages of development in
Tanzania and Kenya. We have a high-quality asset base, solid growth
opportunities and a clear strategy of optimising, expanding and growing our
business.
Maintaining our licence to operate through acting responsibly in relation to
our people, the environment and the communities in which we operate is central
to achieving our objectives.
ABG is a UK public company with its headquarters in London. We are listed on
the Main Market of the London Stock Exchange under the symbol ABG and have a
secondary listing on the Dar es Salaam Stock Exchange. Historically and prior
to our initial public offering (IPO), our operations comprised the Tanzanian
gold mining business of Barrick Gold Corporation, our majority shareholder. ABG
reports in US dollars in accordance with IFRS as adopted by the European Union,
unless otherwise stated in this report.
Conference call
A conference call will be held for analysts and investors on 30 October 2013 at
12:00 GMT with the dial-in details as follows:
Participant dial in:
+44 (0) 203 003 2666 / +1 866 843 4608
Password: ABG
A recording of the conference call will be made available on ABG's website,
www.africanbarrickgold.com, after the call.
FORWARD- LOOKING STATEMENTS
This report includes "forward-looking statements" that express or imply
expectations of future events or results. Forward-looking statements are
statements that are not historical facts. These statements include, without
limitation, financial projections and estimates and their underlying
assumptions, statements regarding plans, objectives and expectations with
respect to future production, projects, operations, costs, products and
services, and the Operational Review and statements regarding future
performance. Forward-looking statements are generally identified by the words
"plans," "expects," "anticipates," "believes," "intends," "estimates", "will"
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 ABG, 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 ABG 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 ABG conducts or may in the
future conduct business, industry trends and developments, competition,
fluctuations in the spot and forward price of gold and copper or certain other
commodity prices (such as diesel fuel and electricity), currency fluctuations
(including the US dollar, South African rand, Kenyan shilling and Tanzanian
shilling exchange rates), ABG's ability to successfully integrate acquisitions,
ABG'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, ABG'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 ABG's business strategy including, without limitation,
ABG's successful implementation of the Operational Review, 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
generally . Although ABG's management believes that the expectations reflected
in such forward-looking statements are reasonable, ABG 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. Subject to the requirements of the Disclosure and
Transparency Rules and the Listing Rules or applicable law, ABG 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, changes in expectations or circumstances, 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 ABG's profits
or earnings per share for any future period will necessarily match or exceed
the historical published profits or earnings per share of ABG.
Bulyanhulu
Key statistics
Three months Nine months
ended ended
30 September 30 September
(Unaudited) 2013 2012 2013 2012
Underground ore tonnes hoisted Kt 232 240 650 746
Ore milled Kt 228 250 642 782
Head grade g/t 7.8 7.8 7.7 8.3
Mill recovery % 90.5% 90.6% 90.8% 90.7%
Ounces produced oz 52,126 56,912 145,100 188,499
Ounces sold oz 50,767 55,687 138,569 189,104
Cash cost per ounce sold US$/oz 769 910 936 762
AISC per ounce sold US$/oz 1,183 1,425 1,437 1,163
Cash cost per tonne milled US$/t 171 202 202 184
Copper production Klbs 1,269 1,414 3,507 4,897
Copper sold Klbs 1,169 1,349 3,204 4,602
Capital expenditure US$('000) 35,969 26,924 118,830 67,163
- Sustaining capital US$('000) 5,314 9,859 20,860 24,918
- Capitalised development US$('000) 10,576 11,244 34,678 33,370
- Expansionary capital US$('000) 20,910 4,799 73,331 5,967
36,800 25,902 128,869 64,255
- Non-cash reclamation asset adjustments US$('000) (831) 1,022 (10,039) 2,908
Operating performance
Bulyanhulu delivered solid performance as it progressed against the recovery
plan, producing 52,126 ounces during the quarter, in line with Q2 2013, and
down 8% on Q3 2012. Ore mined remained constrained due to reduced equipment
availability and delays in accessing mining faces. Plant maintenance led to
increased downtime, which when combined with the reduced ore hoisted resulted
in throughput being 9% below that achieved in Q3 2012. The previous delays in
paste-fill activity resulted in limited access to high grade stopes during the
early part of the quarter, although the situation improved as the quarter
progressed.
Copper production for the quarter of 1.3 million pounds was 10% lower than in
Q3 2012, primarily due to a lower copper grade and lower throughput.
Cash costs per ounce sold for the quarter of US$769 were 15% lower than in Q3
2012 (US$910 per ounce), driven by lower maintenance costs, lower contracted
services, lower labour costs, and lower cost overheads.
AISC per ounce sold of US$1,183 per ounce sold was 17% below Q3 2012 as a
result of the lower cash cost base and lower capitalised development costs.
Cash costs per tonne milled decreased to US$171 in Q3 2013 (US$202 in Q2 2012)
as a result of the lower costs as discussed above.
Capital expenditure for the quarter of US$36.0 million was US$9.0 million
higher than in Q3 2012 (US$26.9 million) primarily as a result of the
expansionary capital spend on the CIL Expansion project (US$18.1 million) and
final payments on long lead items ordered in Q4 2012 for the Upper East project
(US$2.5 million). Included in capital expenditure is a negative non-cash
reclamation adjustment of US$0.8 million.
Buzwagi
Key statistics
Three months Nine months
ended ended
30 September 30 September
(Unaudited) 2013 2012# 2013 2012#
Tonnes mined Kt 7,628 8,664 24,933 20,655
Ore tonnes mined Kt 1,001 800 2,502 2,908
Ore milled Kt 1,165 888 3,455 2,653
Head grade g/t 1.4 1.2 1.3 1.4
Mill recovery % 87.3% 88.3% 87.9% 85.2%
Ounces produced oz 44,408 30,211 130,154 100,942
Ounces sold oz 40,599 32,809 136,966 104,058
Cash cost per ounce sold US$/oz 1,012 1,264 946 1,172
AISC per ounce sold US$/oz 1,436 2,369 1,582 1,927
Cash cost per tonne milled US$/t 35 47 38 46
Copper production Klbs 1,569 1,069 4,915 3,713
Copper sold Klbs 1,279 975 5,357 3,683
Capital expenditure* US$('000) 14,506 31,982 69,692 68,507
- Sustaining capital US$('000) 6,623 14,716 27,280 36,548
- Capitalised development US$('000) 7,986 16,267 49,324 28,963
14,609 30,983 76,604 65,511
- Non-cash reclamation asset adjustments US$('000) (103) 999 (6,912) 2,996
#Restated for the impact of capitalised stripping due to the adoption of IFRIC
20.
Operating performance
As announced in July, we have re-engineered the mine plan at Buzwagi to
significantly reduce the AISC of the mine and to enable positive free cash
generation. We began to implement the new plan during Q3 2013 and as expected
have seen a positive impact on the cost base.
Total tonnes mined of 7.6 million tonnes were 10% lower than in Q2 2013 and 12%
lower than in Q3 2012 as a result of the change in mine plan. Given the focus
on higher return areas under the new plan, ore tonnes mined were 25% higher
than in both Q2 2013 and Q3 2012.
During Q3 2013 the mill continued to operate above the nameplate capacity and
saw a 31% increase in tonnes milled over Q3 2012. During the quarter mill feed
was a blend of mined ore and lower grade stockpiles resulting in a blended
grade of 1.4 g/t, which was 17% higher than in Q3 2012. As planned, the mill
continues to operate largely on self generated power in order to mitigate the
instability of grid power.
As a result of both the improved throughput and grade, production of 44,408
ounces was 47% higher than in Q3 2012. Gold ounces sold during the quarter
trailed production by 9% due to the timing of production and concentrate
shipments leaving site.
Copper production for the quarter of 1.6 million pounds was 47% above
production in Q3 2012. This was primarily due to the increased throughput.
Cash costs for the quarter were US$1,012 per ounce sold compared to US$1,264 in
Q3 2012. Cash costs have been positively affected by the increased production
base, lower contracted services costs due to the lower mining activity and the
renegotiation of contracts resulting in lower rates and a reduction in labour
costs due to a reduction in mainly international employees.
AISC per ounce sold of US$1,436 per ounce decreased by 12% on Q2 2013 and 39%
on Q3 2012. This was due to the overall lower cost base and decreased
capitalised stripping costs and as a result of the change in mine plan. Cash
cost per tonne milled of US$35 was 26% below Q3 2012 due to increased
throughput, combined with lower direct mining costs.
Capital expenditure for the quarter of US$14.5 million was 55% lower than in Q3
2012, driven by lower sustaining capital and capitalised stripping costs as a
result of the new mine plan.
North Mara
Key statistics
Three months Nine months
ended ended
30 September 30 September
(Unaudited) 2013 2012# 2013 2012#
Tonnes mined Kt 5,528 4,057 16,923 12,603
Ore tonnes mined Kt 464 443 1,923 1,016
Ore milled Kt 720 709 2,000 2,046
Head grade g/t 3.4 2.6 3.5 2.4
Mill recovery % 86.9% 88.3% 87.1% 83.9%
Ounces produced oz 67,895 53,120 196,373 129,996
Ounces sold oz 69,695 50,200 199,895 129,800
Cash cost per ounce sold US$/oz 532 912 667 955
AISC per ounce sold US$/oz 1,199 1,517 1,274 1,733
Cash cost per tonne milled US$/t 52 65 67 61
Capital expenditure* US$('000) 33,073 13,105 80,506 61,059
- Sustaining capital US$('000) 10,862 9,405 34,824 30,583
- Capitalised development US$('000) 23,026 3,218 51,943 24,184
- Expansionary capital US$('000) - - 504 4,557
33,888 12,623 87,271 59,324
- Non-cash reclamation asset adjustments US$('000) (815) 482 (6,765) 1,735
# Restated for the impact of capitalised stripping due to the adoption of IFRIC
20.
Operating performance
North Mara continued its strong performance from H1 2013, and delivered gold
production of 67,895 ounces for the quarter, an increase of 6% on Q2 2013 and
28% on Q3 2012. Gold ounces sold amounted to 69,695 ounces for the quarter,
exceeding production by 3% as a result of the sale of inventory on hand at the
end of Q2 2013.
Positive reconciliations from grade control drilling continued during the
quarter which resulted in reduced ore tonnes mined, but an increase in mined
grade. Head grade of 3.4 g/t remained 31% above Q3 2012, but was marginally
below Q2 2013 due to the blending of lower grade stockpiles. We expect to see a
reduction in the grade of ore mined and consequently in head grades towards the
end of the year and into Q1 2014.
Throughput was 2% higher than in Q3 2012 driven by improved availability in the
mill. Recoveries of 86.9% were 2% lower than in Q3 2012, primarily as a result
of instability experienced in the oxygen plant during the quarter. In Q4 2013
we will undertake a planned major shutdown of the crusher which will result in
two weeks of mill downtime.
Total tonnes mined for the quarter amounted to 5.5 million tonnes, 36% higher
than in Q3 2012. Ore tonnes mined of 464,000 were marginally higher than in Q3
2012 as a result of the waste stripping programme undertaken in 2012 and
changes to the mine plan as a result of the grade control model.
Cash costs were US$532 per ounce sold compared to US$912 in Q3 2012. The
decrease in cash costs per ounce was driven by the increased production base
and increased capitalised stripping. This was slightly offset by increased
maintenance and energy costs given increased mining and processing activities.
AISC per ounce of US$1,199 was 21% lower than in Q3 2012 as a result of the
combined effects of lower cash costs and the increase in ounces produced,
slightly offset by the increase in capitalised striping costs. As a result of
the above and combined with the increased throughput, cash cost per tonne
milled of US$52 was 20% lower than in Q3 2012.
Capital expenditure for the quarter of US$33.1 million was 152% higher than in
Q3 2012. Key capital expenditure included capitalised stripping (US$23.0
million) and investments in mine equipment, tailings and infrastructure (US$8.8
million).
As part of the ongoing life of mine review, we have deferred the mining of
Gokona Cut 3 while we finalise the feasibility study into the alternative of
mining out this reserve and additional identified resource through an
underground operation. We expect to complete this study by the middle of 2014.
This option would mine the majority of the 628koz of reserve contained in the
cutback, which was not scheduled to provide meaningful production until 2017,
and would significantly reduce life of mine land requirements. We have
recommenced mining in the Nyabirama pit having been granted a permit to
undertake controlled blasting and made further progress on land acquisitions
around the Gokona pit, spending US$6.7 million on land during the quarter.
We have continued to progress the lifting of the Environmental Protection Order
("EPO") during the quarter and in October commenced a community education
programme which is the last step ahead of the granting of discharge permits.
Exploration and Development Update
As previously announced as part of the Operational Review we have scaled back
our exploration and evaluation budget for 2013 to US$21 million, which is a
reduction of 54% on the 2012 budget (US$46 million). The majority of work this
year is based around deep drilling at Bulyanhulu and targeted greenfields
exploration in both Kenya and at Dett-Ochuna and Tagota in Tanzania. We have
continued to progress the CIL Expansion project at Bulyanhulu and retain the
optionality to progress our other growth projects within the portfolio.
Bulyanhulu CIL Expansion Project
The Bulyanhulu CIL Expansion project continues to progress well and remains on
track for first production in Q1 2014. We remain on budget, with US$88.2
million spent in total to date on the project, of which US$18.1 million was
incurred in Q3 2013. The project is predominantly funded by a US$142 million
debt facility of which US$110 million has been drawn down to date.
Project focus during Q3 2013 was on the progression of civil work and the
commencement of the construction of the structural steel works. The key focus
for Q4 2013 is to accelerate the steel construction, commence the electrical/
instrumentation works and to take timely delivery of the last materials at site
required for commissioning during Q1 2014.
During the quarter we also commenced the first phase of construction of the new
tailing storage facility, in order to hold the expanded CIL tailings, as
required to support the operation of the expanded CIL plant following
commissioning.
Exploration
Tanzania
Bulyanhulu Deeps West
During the quarter we commenced drilling of the first of three deep diamond
core holes west of the Bulyanhulu mine targeting the extension of Reef 1 gold
mineralisation. The planned programme is comprised of approximately 20,000
metres of diamond core drilling from three parent holes and 25 daughter holes
utilising navigational drilling. The holes are testing the extensions of the
Reef 1 structure from 400 metres to 1,200 metres west of the current Bulyanhulu
resource, targeting a new zone and plunge extensions of the Main Zone within
the mine to depths of between 1.0km and 2.5km vertical. Drilling on this target
commenced late in Q3 2013 with a total of 718 metres of diamond core drilling
completed at the end of September.
Kenya
West Kenya JV Project
Exploration programmes in Kenya during Q3 2013 continued to focus on target
generation, mapping, soil sampling and rock chip sampling across selected
regional prospects in order to delineate and validate targets for follow up
programmes. We also commenced a 25,000 metre Aircore drilling programme that is
targeting existing priority gold-in-soil anomalies and favourable structural
corridors beneath transported cover.
During the quarter a total of 4,967 soil samples were collected across the
Kakamega Dome and Lake Zone gold camps on broad (400 metre and 800 metre)
spaced grids, and more than 20 new gold-in-soil anomalies have now been
delineated for infill sampling and/or Aircore drilling.
Aircore drilling to test existing soil anomalies throughout the Kakamega Dome
and Lake Zone gold camps commenced in late Q3 with a total of 28 holes
completed for 482 metres. To date only the target area around the historic
Rosterman mine has been drilled. The aim of the aircore programme is to
establish camp-scale targets for more advanced stage reverse circulation and
diamond core drill testing during H2 2014.
Non IFRS Measures
ABG 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 ABG's financial condition and operating
results. 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.
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;
Unrealised mark-to-market gains and losses on provisional pricing from copper
and gold sales contracts; and
Export duties.
Cash cost per ounce sold is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, by-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.
The presentation of these statistics in this manner allows ABG to monitor and
manage those factors that impact production costs on a monthly basis. ABG
calculates cash costs based on its equity interest in production from its
mines. Cash costs per ounce sold are calculated by dividing the aggregate of
these costs by gold ounces sold. Cash costs and cash costs per ounce sold are
calculated on a consistent basis for the periods presented.
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 costs per ounce sold, and adding corporate
administration costs, reclamation and remediation costs for operating mines,
corporate social responsibility expenses, mine exploration and study costs,
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 is presented below:
(Unaudited) Three months ended 30 September 2013 Three months ended 30 September 2012
(US$/oz sold) Bulyanhulu North Mara Buzwagi ABG Group Bulyanhulu North Mara Buzwagi ABG Group
Cash cost per ounce sold 769 532 1,012 731 910 912 1,264 1,019
Corporate administration 61 33 50 59 107 90 123 88
Rehabilitation 6 22 9 14 11 44 22 28
Mine exploration 3 8 2 6 12 30 7 16
CSR expenses 11 22 3 20 6 24 9 20
Capitalised development 208 330 197 257 202 64 496 216
Sustaining capital 125 252 163 190 177 353 449 330
Attributable to outside interests (2) (9)
Total 1,183 1,199 1,436 1,275 1,425 1,517 2,369 1,709
(Unaudited) Nine months ended 30 September 2013 Nine months ended 30 September 2012
(US$/oz sold) Bulyanhulu North Mara Buzwagi ABG Group Bulyanhulu North Mara Buzwagi ABG Group
Cash cost per ounce sold 936 667 946 853 762 955 1,172 939
Corporate administration 73 37 53 51 73 88 90 83
Rehabilitation 8 30 18 21 9 48 22 34
Mine exploration 4 13 2 7 7 19 6 10
CSR expenses 7 27 4 21 4 36 8 21
Capitalised development 250 260 360 281 176 186 278 199
Sustaining capital 158 240 199 202 132 400 351 282
Attributable to outside interests (7) (5)
Total 1,437 1,274 1,582 1,429 1,163 1,733 1,927 1,563
AISC is intended to provide additional information of what the total sustaining
cost for each ounce sold is, taking into account expenditure incurred in
addition to direct mining costs, depreciation and selling costs.
EBITDA is a non-IFRS financial measure. ABG 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. Prior year EBITDA was restated by US$0.6 million
to reflect the reclassification of bank charges from corporate administration
charges to finance expense.
Adjusted EBITDA is a non-IFRS financial measure. It is calculated by excluding
one-off costs or credits relating to non-routine transactions from EBITDA. It
excludes other credits and charges that individually or in aggregate, if of a
similar type, are of a nature or size that requires explanation in order to
provide additional insight into the underlying business performance.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for
depreciation and amortisation and goodwill impairment charges.
Adjusted net earnings is a non-IFRS measure. It is calculated by excluding
one-off costs or credits relating to non-routine transactions from net profit
attributed to owners of the parent. 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.
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.
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, by-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. ABG calculates cash costs based on its equity interest in
production from its mines. Cash costs per tonne milled are calculated by
dividing the aggregate of these costs by total tonnes milled.
Operating cash flow per share is a non-IFRS financial measure and is calculated
by dividing Net cash generated by operating activities by the weighted average
number of Ordinary Shares in issue.
Mining statistical information
The following describes certain line items used in the ABG 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.
Total tonnes mined includes open pit material plus underground ore tonnes
hoisted.
Strip ratio - measures the ratio waste-to-ore for open pit material mined.
Ore milled - measures in tonnes the amount of ore material processed through
the mill.
Head grade - measures the metal content of mined ore going into a mill for
processing.
Milled recovery - measures the proportion of valuable metal physically
recovered in the processing of ore. It is generally stated as a percentage of
the metal recovered compared to the total metal originally present.
END
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