Mwana Africa PLC QUARTERLY UPDATE (9402W)

TIDMMWA

RNS Number : 9402W

Mwana Africa PLC

25 August 2015

QUARTERLY UPDATE

(Q1 FY2016 - quarter ended 30 June 2015)

21 August 2015

Mwana Africa PLC

("Mwana", the "Group" or the "Company")

Mwana Africa is pleased to provide an update on operations and exploration activity for the quarter ended 30 June 2015.

OPERATIONAL HIGHLIGHTS

GOLD - FREDA REBECCA (ZIMBABWE)

-- Tonnes milled decreased by 0.3% to 293,759t in Q1 FY2016 compared to 297,953t in Q4 FY2015, mainly due to a 1% decrease in mill running time

   --     The average feed grade for Q1 FY2016 increased by 11% from 1.81g/t in Q4 FY2015 to 2.03g/t 
   --     Gold recovery rate for Q1 FY2016 declined by 1% to 82% from 83% in Q4 FY2015 

-- 16,985 ounces (oz) of gold were produced in Q1 FY2016 against 13,443oz in Q4 FY2015. The production increase was mainly attributable to the 11% increase in the mill's average feed grade

-- C1 cash costs were 25% lower in the quarter under review at US$930/oz from US$1,234/oz in Q4 FY2015 largely because of an increase in ounces produced and a 5% reduction in operating costs. All-in sustaining costs were cut by 24% to US$1,093/oz from US$1,429/oz in Q4 FY2015.

-- The average gold price received in Q1 FY2016 was 3% lower at US$1,186/oz compared to US$1,223/oz in Q4 FY2015

NICKEL - TROJAN NICKEL MINE (ZIMBABWE)

-- Production of nickel in concentrate dropped by 34% to 1,349t compared to 2,032t in Q4 FY2015, primarily due to a reduction in average head grade and recoveries

-- Head grade was 26% lower at 1.2% compared to 1.67% in Q4 FY2015 due lower production of massive ores areas compared to the previous quarter

   --     Recovery was 3% lower at 84% against 86.9% in Q4 FY2015 

-- The average net realized nickel in concentrate price dropped by 11% to US$8,461/t compared to US$9,489/t in Q4 FY2015

-- Nickel sales were 39% lower at 1,267t compared to 2,072t in Q4 FY2015 due to lower production

-- C1 actual cash costs of nickel in concentrate rose 29% to US$8,901/t from US$6,926/t Q4 FY2015, and actual all-in-sustaining costs of nickel in concentrate rose by 35% to US$9,736/t in the quarter under review from US$7,209/t in Q4 FY2015 as a result of lower production and refurbishment of equipment

DIAMONDS - KLIPSPRINGER (SOUTH AFRICA)

-- Klipspringer's throughput of Marsfontein fine residue tailings fell to 38,760 tonnes which was 10% lower than in Q4 FY2015

-- Head grade improved by 8% to 44 carats per hundred tonnes (cpht). Mining continued through a transition zone so as to access higher grade material

   --     Diamond sales fell by 45% quarter-on-quarter 

-- The price received for fine diamonds produced by the mine fell by 7% quarter-on-quarter. This was in line with market conditions, which are expected to remain constrained.

EXPLORATION HIGHLIGHTS

GOLD - ZANI-KODO (DEMOCRATIC REPUBLIC OF CONGO - DRC)

-- Field mapping was completed in the Godawiza and Djalasega areas. Exploration activity has now moved to the Kepira and Kodo West areas where prospective lithologies and structures have been identified.

COPPER/COBALT - SEMHKAT/HAILIANG JV (DEMOCRATIC REPUBLIC OF CONGO - DRC)

-- Fieldwork, including mapping, soil sampling and drilling, has been initiated by JV joint-venture partner Hailiang on five priority target areas.

Yat Hoi Ning, Mwana's Executive Chairman, commented:

The past quarter has not been without its challenges, but I am pleased to say that they have been addressed progressively and appropriately. Our main challenges have been external, particularly those of falling commodity prices. However, I remain confident that we can manage and counter the effects of lower prices by operating effectively and economically.

At Freda Rebecca the average gold price received was US$1,186/oz, its lowest in several quarters. But we countered the adverse effect by producing more gold which, in turn, contributed to a significantly lower cash cost of US$930/oz and an all-in sustaining cost of US$1,093/oz. This means the mine remains operationally profitable and will be maintained in that state.

At Bindura Nickel's Trojan mine, operations continued to be hampered by the continued upgrading of equipment; upgrading that will ensure there are fewer interruptions in future. Underground development work has proceeded more slowly than had been planned, but with the redeep project now scheduled for completion in October 2015, the current financial year's second half should see considerable operating improvements that will be followed by the benefits of the smelter restart.

Work on the restart is proceeding on schedule and, when completed, will result in our receiving enhanced prices for the nickel contained in our products. During the quarter under review underground operations were affected by temporary poor availability of ore draw points which resulted in lower utilisation of equipment and increases in underground transport equipment. The result was slower mining rates, though these should improve sharply during the current quarter.

At our Klipspringer diamond joint venture revenues were affected by the lower diamond prices that have been affecting all diamond producers. The processing plant, which recovers gems from old slimes tailings, suffered temporary technical problems which lowered production, but this is expected to be resolved in the current quarter.

In line with the company's determination to limit expenditure, prospecting work with our partners in the DRC has been contained. It has been restricted largely to field work designed to locate further exploration targets and to improve our knowledge of those already delineated.

Overall costs were tightly controlled in the quarter under review, and this will continue well into the future. It is far from clear when commodity prices will improve from their currently depressed levels, but our operations remain cash-flow positive and our capital programmes will remain on track.

For further information please visit www.mwanaafrica.com or contact:

Mwana Africa PLC

Yim Kwan, Finance Director

Amilha Young, Group General Counsel and Company Secretary

Tel: [phone]

Public Relations

Russell and Associates (South Africa)

Tel: [phone]

Leigh King: email: [e-mail]

Jim Jones: email: [e-mail]

OPERATIONS

GOLD: FREDA REBECCA GOLD MINE (ZIMBABWE)

 
                                               Quarter ended 
--------------------  ----------  -------------------------------------- 
 FREDA REBECCA MINE                Jun-15    Mar-15    Dec-14    Sep-14 
--------------------  ----------  --------  --------  --------  -------- 
 Tonnes mined             (t)      351,202   256,459   296,085   290,771 
--------------------  ----------  --------  --------  --------  -------- 
 Tonnes milled            (t)      293,759   297,953   322,216   319,767 
--------------------  ----------  --------  --------  --------  -------- 
 Head grade              (g/t)        2.03      1.81      1.89      2.25 
--------------------  ----------  --------  --------  --------  -------- 
 Recovery                 (%)          82%       83%       76%       80% 
--------------------  ----------  --------  --------  --------  -------- 
 Gold sales              (oz)       16,985    13,443    14,298    16,555 
--------------------  ----------  --------  --------  --------  -------- 
 Average gold price 
  received             (US$/oz)      1,186     1,223     1,195     1,272 
--------------------  ----------  --------  --------  --------  -------- 
 Cash cost (C1)          (US$)         930     1,234     1,118       880 
--------------------  ----------  --------  --------  --------  -------- 
 All-in sustaining 
  cost (C3)              (US$)       1,093     1,430     1,304     1,061 
--------------------  ----------  --------  --------  --------  -------- 
 
   --     Figures shown are unaudited and may vary upon final audit. 

-- C1 cash cost includes costs for mining, processing, administration, accounting movements for stockpiles and gold-in-circuit, and, net proceeds from by-product credits. It excludes capital costs for exploration, mine development or processing mill capital works and royalties.

-- C2 production cost reflects C1 costs plus depreciation and amortisation, thus incorporating the capital cost of production.

-- C3 all-in sustaining cost reflects C2 plus interest, other indirect costs and royalties. All-in sustaining costs represents all costs attributable to gold production over the period.

COMMENTARY

Tonnes mined for the quarter under review increased by 37% to 316,151t from 256,459t in the previous quarter. The upturn in performance was underpinned by improved availability of loading units and flexibility of stopes which resulted from availability of previously flooded stopes as well as stope F890A06B.

Q1 FY2016 gold production increased by 6% to 16,985oz compared to 13,443oz in Q4 FY2015 mainly as a result of an 11% increase in feed grade. Tonnes milled fell slightly by 0.3% to 297,953t in Q1 FY2016 (Q4 FY2015: 297,953t) due in part to a 1% decrease in mill running time. The running time for the quarter was mainly affected by grate relining for both mills and replacement of the No. 1 mill's trunnion liner.

The average feed grade for Q1 FY2016 increased by 11% to 2.03g/t (Q4 FY2015: 1.81g/t). This was a result of mining areas with higher grade confidence which was achieved by utilising data from evaluation-drilling to do short-term planning.

Gold recovery for Q1 FY2016 declined by 1% to 82% from 83% in the previous quarter. The decrease resulted from fine-carbon losses to tails.

(MORE TO FOLLOW) Dow Jones Newswires

August 25, 2015 02:00 ET (06:00 GMT)

In Q1 FY2016, C1 cash costs reduced by 25% to US$930/oz (Q4, FY2015: US$1,234/oz). In Q4 FY2015, C1 included a one-off provision for doubtful debts relating to a contribution made to the Bindura Community Share Ownership Trust of US$1,491,147. This accounts for the major decrease in costs in Q1 FY2016. All-in sustaining costs realised a net decrease of 24% from US$1,429/oz in Q4 FY2015 to US$1,093/oz.

NICKEL: TROJAN NICKEL MINE (ZIMBABWE)

 
                                                Quarter ended 
----------------------  ---------  -------------------------------------- 
 TROJAN MINE                        Jun-15    Mar-15    Dec-14    Sep-14 
----------------------  ---------  --------  --------  --------  -------- 
 Tonnes milled             (t)      129,523   140,045   148,712   161,107 
----------------------  ---------  --------  --------  --------  -------- 
 Head grade                (%)        1.240     1.669     1.156     1.496 
----------------------  ---------  --------  --------  --------  -------- 
 Recovery                  (%)         84.0      86.9      80.5      82.5 
----------------------  ---------  --------  --------  --------  -------- 
 Ni in concentrate         (t)        1,349     2,032     1,383     1,989 
----------------------  ---------  --------  --------  --------  -------- 
 Nickel sales              (t)        1,267     2,072     1,395     2,008 
----------------------  ---------  --------  --------  --------  -------- 
 Average nickel price    (US$/t)      8,461     9,489    10,313    12,085 
----------------------  ---------  --------  --------  --------  -------- 
 Cash cost (C1)          (US$/t)      8,901     6,926    10,666     7,392 
----------------------  ---------  --------  --------  --------  -------- 
 All-in sustaining 
  cost (C3)              (US$/t)      9,736     7,209    11,491     8,059 
----------------------  ---------  --------  --------  --------  -------- 
 
   --     Figures shown are unaudited and may vary upon final audit. 

-- Cash cost per tonne includes costs for mining, processing, administration, offtake costs and penalties, transport costs, accounting movements for stockpiles, and net proceeds from by-product credits. It excludes capital costs for exploration, mine development or processing mill capital works, and, the cost of royalties.

   --     All-in sustaining cost reflects cash cost per tonne plus depreciation and amortisation, thus incorporating the capital cost of production, plus interest, other indirect costs and royalties. All-in-sustaining cost represents all costs attributable to nickel production over the period. 

-- Note: the company has amended the reporting of the nickel price received, cash cost and all-in sustaining cost. The average nickel price received reflects the actual price received rather than the actual average price for the quarter as previously reported. Cash costs and all-in sustaining costs are now reported as actual costs incurred, previously these costs were adjusted for the opportunity cost forgone as a result of selling a nickel concentrate rather than a nickel cathode.

COMMENTARY

Milled tonnage was 8% lower quarter-on-quarter at 129,523t (Q4 FY2015: 140,045t). Milled tonnage was mostly affected by availability of active draw points. This affects ore availability and machine utilisation adversely as tramming distances double. Production is expected to increase in the second quarter due to the ongoing 100-day "Rapid Results Projects" which is expected to increase the number of draw-points and reduce the LHDs' hauling distances. The mine will be on a two-week shut down for the month of July while the sub-vertical service winder is upgraded to reduce the risk of future breakdowns.

The mill head grade was 26% lower at 1.240% (Q4 FY2015: 1.669%) due to lower availability of the "massives" production areas against that during Q4 FY2015. Nickel production fell by 34% to 1,349t (Q4 2015: 2,032t) as a result of lower ore-production tonnage and relatively lower grades.

The average price of nickel in concentrate received decreased by 11% to US$8,461/t (Q4 FY2015: US$9,489/t). Nickel prices continued to fall during the quarter. Analysts predict an eventual improvement in the nickel price as demand is expected to increase, though the timing of this is uncertain.

Cash costs increased by 29% to US$ 8,901/t (Q4 FY2015: US$6,926/t) and all-in sustaining costs increased by 35% to US$9,736/t (Q4 FY2015: US$7,209/t) due to the lower production described above. The company has implemented various cost-reduction initiatives to combat the effect on profits of lower nickel prices. There is a particular focus on cost reduction throughout the organisation.

There have been delays on the re-deep project which is now expected to be completed in October 2015. The completion of this project will enable development into, and production from, massive ore bodies.

Work on the smelter restart project continued. Design work, which had been suspended, has resumed with a focus to expedite the outstanding areas. These include the feed system, off-gas system, furnace roof and sealing arrangements as well as control and instrumentation. A structural audit was completed during the period and the report will be the basis of future refurbishment work. The cooling tower for the compressor-house cooling system was received and installed. Converter off-gas ducting and the precipitator transition pieces were delivered to site. Brick manufacture is now reported to be at 95% and shipping arrangements are in place. The overall project accomplishment is at 36%. The project commitment is at US$13 million and payments to date are US$7million.

DIAMONDS: KLIPSPRINGER (SOUTH AFRICA)

 
 
                                                Quarter ended 
-----------------------  ----------  ----------------------------------- 
 KLIPSPRINGER MINE                    Jun-15   Mar-15    Dec-14   Sep-14 
-----------------------  ----------  -------  --------  -------  ------- 
 Tonnes treated              (t)      38,762    43,504   49,939   44,200 
-----------------------  ----------  -------  --------  -------  ------- 
 ROM diamonds produced    (carats)    17,176    17,870   31,850   32,425 
-----------------------  ----------  -------  --------  -------  ------- 
 Head grade                (cpht)      44.31     41.08     63.8     73.3 
-----------------------  ----------  -------  --------  -------  ------- 
 Recovery                    (%)       99.2%   95.7[1]    99.7%    98.4% 
-----------------------  ----------  -------  --------  -------  ------- 
 Diamond sales            (carats)    17,099    11,748   44,200   23,150 
-----------------------  ----------  -------  --------  -------  ------- 
 Average diamond price    (US$/ct)    $18.11    $19.50   $19.31   $20.93 
-----------------------  ----------  -------  --------  -------  ------- 
 

COMMENTARY

The Greenhurst plant experienced several delays during the quarter which resulted in reduced reduction in the head feed.

Diamond production fell slightly below the level of Q4 FY2015 due to the reduced tonnage throughput. The mining grade improved slightly as operations moved through a fine-material transition zone towards coarser material.

The diamond market remains constrained and the prices received fell in line with those being reported by major producers. Two diamond sales took place during the quarter. Both parcels were sold into the market in Antwerp.

The underground operation along the Leopard fissure remains under care and maintenance. The shaft bottom and lower level have been dewatered following the flooding incident at the end of 2014.

EXPLORATION

GOLD: ZANI-KODO (DRC)

   --     No drilling was carried out during the quarter. 
   --     Exploration activity was focused in field assessment of several target areas. 

-- At Godawiza and Djalasiga mapping has been completed and geological maps and geographic information system (GIS) databases updated. Two new targets, Kepira and Kodo West, have been identified with two potentially mineralised zones present.

-- At Kepira a thrusted outlier of high-magnetic mafic lithologies and banded iron formation (BIF) is present with sulphides locally visible in sheared zones.

-- At Kodo West a sequence similar to that at the Kodo Mine has been identified, with metagreywacke, BIF and metasiltstone present. Visible sulphides are locally present in sheared BIF units.

-- Orientation grab sampling has been carried out in both areas with fieldwork and data compilation ongoing.

COPPER/COBALT: SEMHKAT/HAILIANG JV (DRC)

In early May, ManCom approved the work proposal and budget plan for five initial 'P1' targets. Execution of the programmes in Kawesitu, Mwombe, Kibolwe East, Lufira and PR763 commenced at the end of May. By end June 2015, the following work had been completed:

Mwombe (PR741) -

   --     IP sounding survey: eight points 
   --     Soil sampling and geological mapping is underway in the target area 
   --     Three geological sections have been conducted to date 

-- Work on two diamond drill holes has begun; some malachite mineralisation observed. Drilling is continuing

Kawesitu (PR975 North) -

   --     Soil samples were collected over an area of 3km(2) during the quarter 

Lufira (PR756) -

   --     Soil sampling was conducted with 3,130 samples prepared and quick-assayed by Niton on site 
   --     Two diamond drill holes are in progress 

Kibolwe East -

-- Two diamond drill holes were completed to depths of 230m and 240m respectively. No significant mineralisation was intersected

PR763 -

   --     Soil sampling over 14.2km sections was conducted over three anomalies 

-- 697 samples were prepared and quick-assayed by Niton on site: three drill targets have been delineated

Fieldwork is progressing in all 5 P1 target areas.

ABOUT MWANA AFRICA PLC

(MORE TO FOLLOW) Dow Jones Newswires

August 25, 2015 02:00 ET (06:00 GMT)