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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Acacia Mining Plc | LSE:ACA | London | Ordinary Share | GB00B61D2N63 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 234.00 | 234.60 | 235.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
21 July 2017
Results for the six months ended 30 June 2017 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc (“Acacia’’) reports 2017 interim results
“The first half has posed significant challenges to our operations in Tanzania following the introduction of the concentrate export ban in March and I am pleased with how we have performed in light of this”, said Brad Gordon, Chief Executive Officer of Acacia Mining. “It is a complex and fluid situation which has led to a significant reduction in our cash balance to US$176 million from US$318 million, as a result of being unable to realise US$175 million of revenue during the half together with a US$51 million VAT outflow. We continue to take steps to preserve long-term shareholder value and have served Arbitration notices for our Bulyanhulu and Buzwagi mines and will work to achieve a negotiated resolution, which is the preferable outcome for all parties. In spite of the challenges we faced, we delivered the highest H1 production in the history of the Company, with gold production of 428,203 ounces. AISC for the first six months was US$893 per ounce sold, 5% lower than H1 2016, and if we had been able to sell all of the concentrate produced, AISC would have been approximately US$800 per ounce. As a result of the impact of the ban we are now targeting the lower end of the production guidance range of 850-900,000 ounces for 2017, but due to strong cost discipline we are leaving AISC guidance unchanged.”
Operational Highlights
Financial Highlights
| Three months ended 30 June | Six months ended 30 June | |||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 |
| Gold production (ounces) | 208,533 | 221,815 | 428,203 | 412,025 |
| Gold sold (ounces) | 127,694 | 216,782 | 312,438 | 400,963 |
| Cash cost (US$/ounce)1 | 577 | 595 | 577 | 640 |
| AISC (US$/ounce)1 | 835 | 926 | 893 | 941 |
| Net average realised gold price (US$/ounce)1 | 1,255 | 1,258 | 1,235 | 1,209 |
| (in US$'000) | ||||
| Revenue | 157,763 | 284,038 | 391,664 | 504,947 |
| EBITDA 1 | 79,222 | 119,332 | 161,415 | 184,882 |
| Adjusted EBITDA1 | 83,199 | 114,088 | 166,219 | 180,499 |
| Net earnings/(loss) | 35,716 | 46,282 | 62,543 | (6,128) |
| Basic earnings/(loss) per share (EPS) (cents) | 8.7 | 11.3 | 15.3 | (1.5) |
| Adjusted net earnings1 | 38,500 | 40,659 | 65,906 | 58,767 |
| Adjusted net earnings per share (AEPS) (cents)1 | 9.4 | 9.9 | 16.1 | 14.3 |
| Cash generated from operating activities | (23,909) | 104,864 | 1,315 | 157,096 |
| Capital expenditure2 | 45,628 | 49,142 | 92,456 | 85,172 |
| Cash balance | 175,886 | 284,357 | 175,886 | 284,357 |
| Total borrowings | 85,200 | 113,600 | 85,200 | 113,600 |
1 These are non-IFRS measures. Refer to page 28 for definitions 2 Excludes non-cash capital adjustments (reclamation asset adjustments) and include finance lease purchases and land purchases recognised as long term prepayments
Other Developments
Export of metallic mineral concentrates
As previously announced, on 3 March 2017, the Ministry of Energy and Minerals of the Tanzanian Government announced a general ban on the export of metallic mineral concentrates following a directive made by the President of the United Republic of Tanzania in order to promote the creation of a domestic smelting industry. Following the directive we ceased all exports of our gold/copper concentrate (“concentrate”) including the 277 containers that had been approved for export prior to the ban which are located in Dar es Salaam at both the port and a staging warehouse.
The prevention of exports impacts Bulyanhulu and Buzwagi which produce gold in both doré and in concentrate form due to the mineralogy of the ore. North Mara is unaffected due to 100% of its production being doré. In the first half of 2017, concentrate accounted for 36% of group level production, with 64% of Buzwagi production and 46% of Bulyanhulu production respectively being concentrate.
Acacia has been exporting concentrate from Bulyanhulu since 2001 and from Buzwagi since 2010 and has fully declared all associated gold, copper and silver revenue. Whilst the proportion of gold in the concentrate is less than 0.02% it represents approximately 90% of the value of the concentrate, with copper representing approximately 10% of the value and silver less than 1%. Bulyanhulu and Buzwagi are permitted under their agreements signed with the Government of Tanzania to sell their concentrate products to overseas customers and to export the concentrate in containers, and have been in full compliance with these laws and their export permits.
During the second quarter two Presidential Committees announced their findings following investigations into the technical and economic aspects of the historic exports of gold/copper concentrates. Acacia fully refutes the implausible findings of both committees, which claim that Acacia and its predecessor companies have historically significantly under-declared the contents of exports of concentrate which has led to an under-declaration of taxes of tens of billions of dollars. Following the Committees’ announcements, the Government commenced various investigations into the allegations of undeclared revenue and unpaid taxes. Acacia is fully co-operating with these investigations and has provided extensive documentation and information to the investigating authorities. In addition, employees in Tanzania have been and continue to be interviewed by Government agencies as part of this process. Acacia re-iterates that it has declared everything of commercial value that it has produced since it started operating in Tanzania and has paid all appropriate royalties and taxes on all of the payable minerals that it has produced. In addition, Acacia’s consolidated accounts and each local company’s accounts are annually audited to an international standard in accordance with IFRS. Acacia has requested copies of the two Presidential Committees’ reports and called for independent verification of the reported results, but to date has not received a response.
As reported at the end of Q1 2017, included in the concentrate shipments retained in Dar es Salaam were approximately 18,200 ounces of gold for which we received advance payment. As mentioned, there was the possibility that the advanced payment would have to be refunded as these shipments did not leave Tanzania within the contractual period. During Q2 2017, we repaid approximately US$22 million, being the full advance payment received, and have subsequently reversed the sale. Should the ban be lifted, these ounces can be sold again immediately as all royalties have been paid and export permits were previously granted.
We have continued to operate at Bulyanhulu and Buzwagi during the first half and continue to stockpile concentrate at each of the sites. This has resulted in the build-up of approximately 127,000 ounces of gold contained in unsold concentrate. In addition, we have approximately 8.3 million pounds of copper and 107,000 ounces of silver contained in the unsold concentrate. If the concentrate had been sold, net revenue and cashflow would have increased by approximately US$163 million. AISC was impacted on a unit cost basis by the concentrate ban, and had we sold all of the ounces produced, AISC for the half year would have been approximately US$800 per ounce, and before the impact of the share based payment revaluation credit would have been approximately US$818 per ounce.
In June, the Government of Tanzania and Barrick Gold Corporation (“Barrick”) agreed to commence discussions with the aim of resolving the current situation. Whilst these discussions are yet to commence, we understand that they will do so in the near future and that both sides will seek to achieve a timely resolution to the dispute. At this stage, Acacia is not participating directly in the discussions. Any potential resolution that might be identified as a result of the discussions will be subject to approval by Acacia, and the Company is working with Barrick to support such discussions.
Acacia’s preferred outcome remains for a negotiated settlement with the Government, and whilst we see a route to achieving this we believe that it makes sense to continue operations at all three of our mines despite the losses we are incurring, predominantly at Bulyanhulu. However, given the scale of the cash outflows at Bulyanhulu we do not believe that this situation is sustainable at that operation beyond the end of the current quarter. In the event a decision was made to move Bulyanhulu to temporary care and maintenance, Acacia estimates that it would incur approximately US$30 million of upfront costs to retrench employees and end contracts in addition to the natural unwinding of around two months’ worth of accounts payable with minimal gold production over the same period. Going forward, monthly costs of US$2-3 million would be incurred to maintain the mine in good standing ahead of a future re-start, when the mine would then benefit from the initial build-up of accounts payable.
Update on legislative changes in Tanzania
On 29th June, three new Parliamentary bills, which recommended significant changes to the legal and regulatory framework governing the natural resources sector as a whole in Tanzania, were published under a certificate of urgency which led to the extension of the Parliamentary session. Post period end, these bills were enacted by the Tanzanian Parliament and published in the Country’s official Government Gazette of new legislation. All of the legislation is now in force and some of the terms within the acts are being applied by Tanzanian authorities.
The Natural Wealth and Resources (Permanent Sovereignty) Act, No 5 of 2017, the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Act, No 6 of 2017 and the Written Laws (Miscellaneous Amendments) Act, No 7 of 2017, purport to make a number of changes to the operating environment for Tanzania’s extractive industries. These changes include, among others:
For a more detailed reading of the legislative provisions included in the new laws, please see http://www.parliament.go.tz/bills-list.
This legislation is in addition to the recent amendments introduced to the Finance Act, which require mining companies to pay a 1% clearance fee calculated by reference to the gross value of minerals to the Government in order to obtain clearance for export (“Clearing Fee”). It is Acacia’s belief that a number of the changes contained within the laws will require supplementary regulations over the coming months to set out the proposed practical implementation of the new laws. At this stage, Acacia is not aware of this process having commenced.
Acacia continues to monitor the impact of the new legislation in light of its Mineral Development Agreements (“MDAs”) with the Government of Tanzania. However, to minimise further disruptions to our operations we will, in the interim, satisfy the requirements imposed as regards the increased royalty rate applicable to metallic minerals such as gold, copper and silver of 6% (increased from 4%), in addition to the recently imposed 1% clearing fee on exports. These payments are being made under protest, without prejudice to our legal rights under the MDAs.
Filing of Notice of Arbitration
Subsequent to period end Acacia announced that it served Notices of Arbitration in Tanzania on behalf of Bulyanhulu Gold Mine Limited (“BGML”), the owner of the Bulyanhulu mine, and Pangea Minerals Limited (“PML”), the owner of the Buzwagi mine. These Notices refer the current disputes between the Government of Tanzania and each of BGML and PML to arbitration. This is in accordance with the dispute resolution processes agreed by the Government of Tanzania in its MDAs with BGML and PML.
The serving of the Notices was necessary to protect the Company, and is currently with the Government to respond, but Acacia remains of the view that a negotiated resolution is the preferred outcome to the current disputes and the Company will continue to work to achieve this.
Minimum local shareholding and listing requirements for mining companies
During the latest Tanzanian Parliamentary session, the legislation impacting the ability for foreign investors to buy shares in initial public offers was amended, which significantly broadens the potential investor base for future offerings. At this stage, other than Acacia’s existing cross listing on the Dar es Salaam Stock Exchange (“DSE”), no companies in either the Mining or Telecommunications sectors have successfully completed a listing on the DSE. Acacia supports the attempt to build capital markets in Tanzania and the promotion of local ownership and we have engaged with the Capital Markets and Security Authority (CMSA), the DSE, the Ministry of Energy and Minerals and all other relevant authorities in Tanzania with a view to finding a route forward that is both beneficial and practical for all stakeholders.
Contribution to Tanzania
In the first half of 2017, Acacia has paid a total of US$53 million of taxes and royalties. This is made up of provisional corporate tax payments year of US$17.3 million, royalties of US$18.6 million, payroll taxes of US$11.5 million and other taxes of US$5.6 million. In addition, we have also paid US$10 million in tax deposits which is recognised as part of other assets. If the gold/copper concentrate produced since March was sold during the first half then approximately a further US$7 million would have been paid in royalties. We have also paid local service levies due on H2 2016 revenues of US$1.6 million during the first half and are due to pay a further US$1.2 million in July for H1 2017. These amounts are 300% higher than the requirements set out in our MDAs. The provisional corporate tax payments have been offset against the indirect tax receivable under the existing Memorandum of Settlement (“MOS”) entered into with the Tanzanian Government.
Over the last 6 months, Acacia’s Sustainable Communities (SC) team continued to focus on delivering community benefits despite the uncertainties in the operating environment. The focus for the first half of the year was to begin and/or complete key infrastructural projects which we had committed to the communities and also to begin the roll out of the new SC strategy by building some of the foundations for implementation.
By end of June 2017, through the Maendeleo Fund, we implemented 6 social infrastructure projects with a total value of approximately US$1 million at the 3 mines sites – some of which began at the end of 2016. The key projects per site include:
An additional 10 infrastructural development projects are currently underway across all our sites with a value of US$940,000 which include school infrastructure, water supply, sanitation and maintenance of community roads. Other development projects in the last 6 months include continuing our support to 2,700 students with uniforms and books under the CanEducate partnership; supporting sports through coaching clinics in partnership with Sunderland Football Club and provision of reconstructive surgery for 36 burns and cleft lip and palate patients through our partnership with Rafiki Medical Missions.
In addition, Acacia, in partnership with TANESCO, has invested US$2.5 million to construct a STATCOM centre at Bulyanhulu that will enhance the quality of power supply in the area. The investment will greatly improve the stability of the electricity at the Bulyanhulu and Buzwagi mines and will reduce our reliance on self-generated diesel power. Residents in the Shinyanga and Geita districts around the mines will also benefit from improved quality power supply resulting from the commissioning of the STATCOM in July 2017.
During the reporting period, we shared our SC strategy with some of our key partners including government officials, development partners and other interested parties to increase awareness of the strategy. A database is under design to allow us to effectively monitor and evaluate our development efforts and it is expected to be completed in Q3 2017. Our future development projects will be informed by research and a consulting firm has been contracted to do an assessment of opportunities for development in the agricultural and small business sectors around our mine sites. Results from this study are expected in Q4 2017 and will be used to plan 2018 development initiatives. This study is in addition to the education scoping study which was completed in January 2017.
Indirect Taxation update
During the second quarter, Acacia incurred a further US$23 million of VAT outflows and received no VAT refunds, which together with the outflow in Q1 2017 has led to a total VAT outflow in the first half of 2017 of US$51 million. The audit of all VAT claims dating back to 2014 undertaken by the Tanzanian Revenue Authority and the Ministry of Finance is ongoing, with the focus now shifted to the suppliers to which our VAT claims relate, to determine whether the corresponding output VAT on their side has been declared. We believe that all VAT registered businesses are subject to this audit. As a result, our total indirect tax receivables has increased to approximately US$165 million during the quarter, of which approximately US$21 million of this is covered by the MOS, following the total offset of North Mara corporate tax mentioned above. Approximately US$7 million of the receivable is identified as a long term receivable, with the balance short term.
As disclosed above, the new legislation included an Amendment to the VAT Act 2015 so that no input tax credit can be claimed for the exportation of raw minerals, with effect from 20 July 2017. Whilst we are seeking further clarity on the application of the Amendment to the VAT Act 2015, we expect that we will continue to incur outflows related to VAT, notwithstanding exemptions that apply under the MDAs.
Board Changes
As previously reported, Peter Tomsett stepped down from the Acacia Board of Directors following the 2017 Annual General Meeting. Post period end, Ambassador (retd) Juma Mwapachu retired from the Board after six years of service as his term of appointment expired. Following these changes, the Acacia Board comprise 7 members, including 4 Independent Non-Executive Directors, two Non-Executive Directors and one Executive Director. Acacia continues to assess the ongoing composition of the Board and will announce a replacement Senior Independent Director in due course.
Acacia would like to thank Peter and the Ambassador for their valuable commitment and support to the Company during their tenure on the Board and wish them all the best for the future.
Dividend
Acacia has a cash flow based dividend policy where we aim to pay a dividend of between 15-30% of our operational cash flow after sustaining capital and capitalised development but before expansion capital and financing costs. As a result of the inability to export concentrates Acacia has experienced negative free cash flow in the first half of 2017 and due to the level of uncertainty over full year cash flow expectations, the Board of Directors has not recommended the payment of an interim dividend.
International Employee Work Permits
During the second quarter Acacia, and a number of its key contractors, experienced difficulty when applying for work and residence permits (as both are required to work in country) for international workers. This has had a particular impact on our underground development contractor at both Bulyanhulu and North Mara and led to a reduction in development metres as a result of the reduction in available staff. Together with the contractor, Acacia is working to resolve this issue with the Tanzanian Ministry of Labour, but expects full year development metres at both Bulyanhulu and North Mara to be behind plan.
Outlook
Our three mines continue to produce and sell gold doré whilst stockpiling gold/copper concentrate. As mentioned above, as at 30 June 2017 we have approximately 127,000 ounces of gold, 8.3 million pounds of copper and 107,000 ounces of silver contained within unsold concentrate. We reiterate our group production guidance range of between 850,000-900,000 ounces, although are now targeting the lower end of this range. This is a result of full year expectations at Bulyanhulu being approximately 10% lower than previously planned due to lower underground productivities. Despite this, we continue to expect full year group all-in sustaining costs of between US$880 – US$920 per ounce and cash cost per ounce of between US$580 – US$620 per ounce. Our cost guidance is inclusive of the payment of the higher royalties and clearing fee, which are currently being paid under protest. In light of ongoing developments in Tanzania we continue to assess our capital expenditure and now expect this to be between US$180-200 million for the year as we defer non-essential spend. We continue to review broader spending across the business to ensure that we manage cash outflows whilst we are unable to export 100% of our production.
| Key Statistics | Three months ended 30 June | Six months ended 30 June | ||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 |
| Tonnes mined (thousands of tonnes) | 8,558 | 9,939 | 18,039 | 19,346 |
| Ore tonnes mined (thousands of tonnes) | 3,996 | 2,244 | 7,212 | 4,689 |
| Ore tonnes processed (thousands of tonnes) | 2,440 | 2,412 | 4,860 | 4,900 |
| Process recovery rate exc. tailings reclaim (percent) | 93.0% | 89.6% | 93.2% | 92.6% |
| Head grade exc. tailings reclaim (grams per tonne) | 3.3 | 3.7 | 3.4 | 3.2 |
| Process recovery rate inc. tailings reclaim (percent) | 89.3% | 88.9% | 89.6% | 87.7% |
| Head grade inc. tailings reclaim (grams per tonne) | 3.0 | 3.2 | 3.1 | 3.0 |
| Gold production (ounces) | 208,533 | 221,815 | 428,203 | 412,025 |
| Gold sold (ounces) | 127,694 | 216,782 | 312,438 | 400,963 |
| Copper production (thousands of pounds) | 4,409 | 4,624 | 9,065 | 8,427 |
| Copper sold (thousands of pounds) 3 | (1,183) | 4,403 | 1,304 | 8,084 |
| Cash cost per tonne milled exc. tailings reclaim (US$/t)1 | 34 | 62 | 43 | 60 |
| Cash cost per tonne milled inc. tailings reclaim (US$/t)1 | 30 | 54 | 37 | 52 |
| Per ounce data | ||||
| Average spot gold price2 | 1,257 | 1,260 | 1,238 | 1,221 |
| Net average realised gold price1 | 1,255 | 1,258 | 1,235 | 1,209 |
| Total cash cost1 | 577 | 595 | 577 | 640 |
| All-in sustaining cost1 | 835 | 926 | 893 | 941 |
| Average realised copper price (US$/lb) | 2.56 | 2.16 | 2.99 | 2.13 |
Financial results
| Three months ended 30 June | Six months ended 30 June | ||||
| (Unaudited, in US$'000 unless otherwise stated) | 2017 | 2016 | 2017 | 2016 | |
| Revenue | 157,763 | 284,038 | 391,664 | 504,947 | |
| Cost of sales | (94,571) | (183,539) | (243,967) | (355,439) | |
| Gross profit | 63,192 | 100,499 | 147,697 | 149,508 | |
| Corporate administration | (5,878) | (4,469) | (12,520) | (9,771) | |
| Share based payments | 18,209 | (15,697) | 7,785 | (19,635) | |
| Exploration and evaluation costs | (9,372) | (5,199) | (16,150) | (11,150) | |
| Corporate social responsibility expenses | (1,544) | (1,744) | (3,739) | (4,614) | |
| Other (charges)/ income | (8,802) | 2,776 | (19,617) | 2,168 | |
| Profit before net finance expense and taxation | 55,805 | 76,166 | 103,456 | 106,506 | |
| Finance income | 946 | 197 | 1,543 | 490 | |
| Finance expense | (3,216) | (2,514) | (5,454) | (5,380) | |
| Profit before taxation | 53,535 | 73,849 | 99,545 | 101,616 | |
| Tax expense | (17,819) | (27,567) | (37,002) | (107,744) | |
| Net profit/(loss) for the period | 35,716 | 46,282 | 62,543 | (6,128) | |
1 These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to “Non IFRS measures” on page 28 for definitions.
2 Reflect the London PM fix price.
3 Negative sales quantities relate to the reversal of sales recorded during Q1 2017.
For further information, please visit our website: http://www.acaciamining.com/ or contact:
| Acacia Mining plc | +44 (0) 207 129 7150 |
Brad Gordon, Chief Executive Officer
Andrew Wray, Chief Financial Officer
Giles Blackham, Investor Relations Manager
| Camarco | +44 (0) 20 3757 4980 |
Gordon Poole / Billy Clegg / Nick Hennis
About Acacia Mining plc
Acacia Mining plc (LSE:ACA) is Tanzania’s largest gold miner and one of the largest producers of gold in Africa. We have three producing mines, all located in north-west Tanzania: Bulyanhulu, Buzwagi, and North Mara and a portfolio of exploration projects in Tanzania, Kenya, Burkina Faso and Mali.
Our approach is focused on strengthening our core pillars; our business, our people and our relationships, whilst continuing to invest in our future. Our ambition is to create a leading African Company.
Acacia is a UK public company headquartered in London. We are listed on the Main Market of the London Stock Exchange with a secondary listing on the Dar es Salaam Stock Exchange. Barrick Gold Corporation is our majority shareholder. Acacia reports in US dollars and in accordance with IFRS as adopted by the European Union, unless otherwise stated in this report.
Conference call
A presentation will be held for analysts and investors on 21 July 2017 at Noon London time.
For those unable to attend, an audio webcast of the presentation will be available on our website http://www.acaciamining.com/. For those who wish to ask questions, the access details for the conference call are as follows:
Participant dial in +44 20 3059 8125 / +1 724 928 9460
Password: Acacia
FORWARD- LOOKING STATEMENTS
This report includes “forward-looking statements” that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical facts. These statements include, without limitation, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, projects, and statements regarding future performance. Forward-looking statements are generally identified by the words “plans,” “expects,” “anticipates,” “believes,” “intends,” “estimates” and other similar expressions.
All forward-looking statements involve a number of risks, uncertainties and other factors, many of which are beyond the control of Acacia, which could cause actual results and developments to differ materially from those expressed in, or implied by, the forward-looking statements contained in this report. Factors that could cause or contribute to differences between the actual results, performance and achievements of Acacia include, but are not limited to, changes or developments in political, economic or business conditions or national or local legislation or regulation in countries in which Acacia conducts - or may in the future conduct - business, industry trends, competition, fluctuations in the spot and forward price of gold or certain other commodity prices (such as copper and diesel), currency fluctuations (including the US dollar, South African rand, Kenyan shilling and Tanzanian shilling exchange rates), Acacia’s ability to successfully integrate acquisitions, Acacia’s ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, and to process its mineral reserves successfully and in a timely manner, Acacia‘s ability to complete land acquisitions required to support its mining activities, operational or technical difficulties which may occur in the context of mining activities, delays and technical challenges associated with the completion of projects, risk of trespass, theft and vandalism, changes in Acacia‘s business strategy including, the ongoing implementation of operational reviews, as well as risks and hazards associated with the business of mineral exploration, development, mining and production and risks and factors affecting the gold mining industry in general. Although Acacia‘s management believes that the expectations reflected in such forward-looking statements are reasonable, Acacia cannot give assurances that such statements will prove to be correct. Accordingly, investors should not place reliance on forward-looking statements contained in this report.
Any forward-looking statements in this report only reflect information available at the time of preparation. Save as required under the Market Abuse Regulation or otherwise under applicable law, Acacia explicitly disclaims any obligation or undertaking publicly to update or revise any forward-looking statements in this report, whether as a result of new information, future events or otherwise. Nothing in this report should be construed as a profit forecast or estimate and no statement made should be interpreted to mean that Acacia‘s profits or earnings per share for any future period will necessarily match or exceed the historical published profits or earnings per share of Acacia.
LSE: ACA
TABLE OF CONTENTS
| Interim Operating Review | 9 |
| Exploration Review | 15 |
| Financial Review | 21 |
| Significant judgements in applying accounting policies and key sources of estimation uncertainty | 27 |
| Non-IFRS measures | 28 |
| Risk Review | 32 |
| Condensed Financial Information: | |
| - Consolidated Income Statement and Consolidated Statement of Comprehensive Income | 36/37 |
| - Consolidated Balance Sheet | 38 |
| - Consolidated Statement of Changes in Equity | 39 |
| - Consolidated Statement of Cash Flows | 40 |
| - Notes to the Condensed Financial Information | 41 |
Operating Review
Half Year Review
Despite the uncertainty caused by the operating environment in Tanzania, Acacia has continued to record impressive safety results, with a H1 Total Recordable Injury Frequency Rate (TRIFR) of 0.40, which is 49% lower than the corresponding period in 2016. This performance is coupled with a decrease in the Injury Severity Rate and the number of High Potential Incidents recorded as compared to the corresponding period in 2016. The site management team continues to engage and communicate regularly with the workforce on the situation in Tanzania and to conduct audits and inspections of all workplaces. All operations maintain excellent house-keeping and empower and encourage the workforce to stop work if the need requires.
Acacia delivered first half production of 428,203, an increase of 4% year on year, while AISC of US$893 per ounce sold and cash cost of US$577 per ounce sold were 5% and 10% respectively lower than H1 2016. As a result of the ban on the export of gold/copper concentrate, sales ounces trailed production by approximately 115,000 ounces. For reference purposes, if H1 sales ounces equalled H1 production, AISC would have been approximately US$800 per ounce and cash costs would have been approximately US$569 per ounce.
North Mara achieved production of 179,578 ounces for the first half, up 3% from H1 2016. This was a result of 2% higher head grade driven by the preferential processing of higher grade stockpile ore from the Nyabirama pit; as well as continued high grades from the Gokona underground mine albeit slightly lower on average than H1 2016, combined with a 1% improvement in recoveries. Gold ounces sold of 178,130 ounces were 5% higher than the comparative period and broadly in line with production. Ore tonnes from underground mining were 50% higher in the first half, due to Gokona underground development being at a more advanced stage with access to more stopes compared to H1 2016. AISC of US$736 per ounce sold was 2% higher than H1 2016 (US$720) primarily due to slightly higher cash costs, higher capitalised development costs and higher sustaining capital expenditure offset by the impact of increased sales volumes.
At Buzwagi, gold production of 126,084 ounces was 57% higher than H1 2016, and in line with expectations. This was mainly due to a 50% increase in head grade driven by higher grade ore mined from the main ore zone at the bottom of the open pit in H1 2017. AISC per ounce sold of US$770 was 31% lower than in H1 2016, mainly driven by the increased production base, lower cash cost and lower sustaining capital expenditure, partly offset by the impact of lower sales volumes on individual cost items.
Bulyanhulu produced 122,542 gold ounces, 22% lower than the same period in 2016. This was due to a 25% decrease in ounces produced from underground mining over H1 2016, mainly driven by a 16% decrease in throughput due to lower ore tonnes mined, together with a 12% decrease in head grade, mainly due to the impact of mine sequencing. AISC per ounce sold for the first half of US$1,340 was 38% higher than H1 2016 (US$970) driven by the impact of lower sales ounces on individual cost items, higher cash costs and higher capitalised development costs, slightly offset by lower sustaining capital spend.
Total tonnes mined during the first half amounted to 18.0 million tonnes, 7% lower than H1 2016, mainly as a result of a 48% decrease in total waste tonnes mined at Buzwagi as the open pit will conclude later this year. Ore tonnes mined of 7.2 million tonnes were 54% higher than H1 2016 driven predominantly by increased ore tonnes from Buzwagi as a result of improved access to ore zones in the final stage of the open pit in H1 2017.
Ore tonnes processed amounted to 4.9 million tonnes, slightly lower than H1 2016. Lower run of mine tonnes at Bulyanhulu and lower throughput at North Mara was partly offset by higher reprocessed tailing throughput at Bulyanhulu.
Head grade for the period (excluding tailings retreatment) of 3.4g/t was 6% higher than in H1 2016 (3.2g/t) primarily driven by a 50% higher head grade at Buzwagi as a result of higher grade ore mined.
Cash costs of US$577 per ounce sold for the year to date were 10% lower than in H1 2016, primarily due to:
This was offset by
Included in cost of sales and ultimately cash cost for the first half, is a credit of approximately US$63.6 million (US$204/oz) relating to the build-up in finished gold inventory due to concentrate sales delays, which largely offsets the impact of the reduction in sales ounces in the cash cost per ounce sold calculation.
All-in sustaining cost of US$893 per ounce sold for the first half was 5% lower than H1 2016, despite the lag in sales against production. This was driven by the lower cash costs (US$64/oz) as well as a credit relating to share based payment revaluation driven by the approximate 33% reduction in the Acacia share price (US$25/oz), partly offset by the impact of lower sales volumes on individual cost items (US$85/oz) and higher capitalised development costs at both North Mara and Bulyanhulu (US$16/oz).
If our sales ounces equalled production, AISC for the first half would have been approximately US$800 per ounce sold, compared to US$916 per ounce sold on the same basis in H1 2016, a decrease of 13%, and excluding the impact of non-cash share based payment revaluation credits would have been approximately US$819.
Cash from operating activities of US$1.3 million compared negatively to the inflow of US$157.1 from H1 2016. The inability to export our concentrate has had a negative impact on operating cash flow of approximately US$163 million. Working capital outflows mainly relating to increases in supplies inventory and indirect tax receivables further impacted cash generated from operating activities.
Capital expenditure amounted to US$92.5 million compared to US$85.2 million in H1 2016. Capital expenditure primarily comprised of capitalised development and stripping (US$64.3 million), investment in mobile equipment and component change-outs at both North Mara and Bulyanhulu (US$6.6 million), investment in fixed equipment and mining infrastructure mainly at Bulyanhulu (US$4.6 million), and land purchases at North Mara (US$1.2 million).
Second Quarter Review
Acacia recorded 5 Lost Time Injuries during the quarter with 3 at Bulyanhulu, 1 at North Mara and 1 with Discovery in Kenya, a decrease of 37% on the same period in 2016. Two of the injured were Acacia employees, whilst three were contractor employees. Of the 9 Medically Treated Incidents in Q2 2017, all were contractor employees, which is a focal point in Q3 2017. Q2 Total Recordable Injury Frequency Rate (TRIFR) of 0.51 was 38% lower than the corresponding period in 2016.
Production for Q2 2017 amounted to 208,533 ounces, a decrease of 6% on the same period in 2016.
North Mara produced 83,110 ounces in Q2 2017, 17% lower than in Q2 2016 and a 13% decrease from Q1 2017, driven by lower head grades compared to Q2 2016, mainly as a result of lower mine grades year on year. Total open pit tonnes mined decreased by 5% from Q2 2016 driven by lower waste mined in the Nyabirama pit while total ore tonnes mined increased by 18% compared to the same period. Ore tonnes from underground mining of 162kt were 91% higher in Q2 2017, due to Gokona underground development being at an advanced stage with access to more stopes compared to Q2 2016. Cash cost per ounce sold of US$476 was 25% higher than in Q2 2016, primarily driven by the lower production base, lower capitalised development costs mainly due to lower waste stripping at the Nyabirama pit and higher direct mining costs driven by higher labour, fuel and consumables cost. AISC of US$758 per ounce sold was 7% higher than in Q2 2016 due to a lower production base and higher cash costs, partly offset by lower capitalised development costs and a decrease in sustaining capital expenditure.
At Buzwagi, gold production for the quarter of 66,228 ounces was 53% higher than Q2 2016, and 11% ahead of Q1 2017. Total tonnes mined decreased by 22% from Q2 2016 while ore tonnes mined were more than double compared to the prior quarter due to the focus of mining at the bottom of the pit which contains more ore tonnes. Cash cost per ounce sold of US$705 was 26% lower than Q2 2016 mainly due to lower direct mining costs driven by lower consumable and external services costs, lower sales related costs due to lower sales volumes combined with the impact of the higher production base partly offset by lower co-product revenue. AISC of US$762 per ounce sold was 25% lower than Q2 2016, primarily due to lower cash cost combined with a credit relating to share based payment valuations, partially offset by the effect of lower sales volumes on the individual cost items.
Bulyanhulu produced 59,196 ounces, 25% lower than the same period in Q2 2016 and 6% lower than Q1 2017. Ounces produced from underground mining amounted to 50,340 ounces, a 28% decrease on Q2 2016 mainly due to lower ore tonnes received from underground combined with a 10% decrease in grade, while ounces produced from the reprocessing of tailings amounted to 8,856 ounces, an increase of 6%. Lower mining tonnes of 203,000 tonnes were mainly due to lower productivities as well as inaccessibility of certain stopes. AISC amounted to US$1,558 per ounce sold for the quarter, 63% higher than in Q2 2016 and 3% lower than Q1 2016, mainly driven by the lower production base and the effect of lower sales volumes on the individual cost items combined with higher cash costs for the quarter.
Total tonnes mined during the quarter amounted to 8.6 million tonnes, 14% lower than Q2 2016 while total ore tonnes mined of 4.0 million tonnes exceeded the comparative period by 78%. This was mainly due to increased ore tonnes from North Mara and Buzwagi.
Total tonnes processed amounted to 2.4 million tonnes, broadly in line with Q2 2016, with head grade for the quarter (excluding tailings retreatment) of 3.3g/t was 11% lower than Q2 2016 (3.7g/t) due to lower grades at North Mara and Bulyanhulu.
Capital expenditure for the quarter amounted to US$45.6 million compared to US$49.1 million in Q2 2016, a decrease of 7%. Capital expenditure primarily comprised capitalised development (US$30.5 million), expansion capital relating to capitalised drilling at North Mara (US$3.5 million), investment in fixed equipment and mining infrastructure (US$5.4 million) and investment in mobile equipment and component change-out costs (US$4.0 million).
Mine Site Review
Bulyanhulu
Key statistics
| Three months ended 30 June | Six months ended 30 June | |||||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | ||
| Key operational information: | ||||||
| Ounces produced | oz | 59,196 | 78,643 | 122,542 | 157,069 | |
| Ounces sold | oz | 27,409 | 78,271 | 81,214 | 150,719 | |
| Cash cost per ounce sold1 | US$/oz | 813 | 662 | 795 | 661 | |
| AISC per ounce sold1 | US$/oz | 1,558 | 958 | 1,340 | 970 | |
| Copper production | Klbs | 1,313 | 1,710 | 2,811 | 3,527 | |
| Copper sold2 | Klbs | (357) | 1,574 | 599 | 3,154 | |
| Run-of-mine: | ||||||
| Underground ore tonnes hoisted | Kt | 204 | 236 | 409 | 479 | |
| Ore milled | Kt | 202 | 250 | 423 | 502 | |
| Head grade | g/t | 8.6 | 9.6 | 8.5 | 9.7 | |
| Mill recovery | % | 89.9% | 90.8% | 90.7% | 89.3% | |
| Ounces produced | oz | 50,340 | 70,307 | 104,596 | 140,083 | |
| Cash cost per tonne milled1 | US$/t | 91 | 185 | 133 | 180 | |
| Reprocessed tailings: | ||||||
| Ore milled | Kt | 410 | 402 | 823 | 780 | |
| Head grade | g/t | 1.4 | 1.4 | 1.4 | 1.5 | |
| Mill recovery | % | 46.9% | 45.6% | 47.2% | 45.9% | |
| Ounces produced | oz | 8,856 | 8,336 | 17,946 | 16,986 | |
| Capital Expenditure | ||||||
| - Sustaining capital | US$('000) | 4,387 | 4,421 | 8,599 | 11,506 | |
| - Capitalised development | US$('000) | 14,984 | 15,270 | 31,054 | 28,438 | |
| - Expansionary capital | US$('000) | 504 | 559 | 982 | 753 | |
| 19,875 | 20,250 | 40,635 | 40,697 | |||
| - Non-cash reclamation asset adjustments | US$('000) | (851) | 5,723 | 191 | 9,937 | |
| Total capital expenditure | US$('000) | 19,024 | 25,973 | 40,826 | 50,634 | |
1These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ‘Non-IFRS measures” on page 28 for definitions.
2Negative sales quantities relate to the reversal of sales recorded during Q1 2017.
Operating performance
Gold production for the first half of 122,542 ounces was 22% lower than the same period in 2016. This was due to a 25% decrease in ounces produced from underground mining over H1 2016, driven by a 16% decrease in throughput and a 12% reduction in head grade During H1 2017, we increasingly experienced lower underground productivities which impacted both tonnes mined and head grades. Whilst we expect improvement on both measures in the second half, full year output is expected to be approximately 10% lower than previously planned. Production from the reprocessing of tailings saw an increase of 6% against H1 2016 due to an increase in throughput and recoveries, which was partially offset by slightly lower grades.
Production during the quarter comprised of 24,911 ounces of gold in concentrate and 34,285 ounces of gold in doré, amounting to a total of 55,699 ounces of gold in concentrate and 66,843 ounces of gold in doré for the first half of 2017.
Gold sold for the year to date amounted to 81,214 ounces, 46% lower than H1 2016 and 34% lower than production, mainly as a result of the inability to export concentrate from early March combined with the lower production base. Sales ounces for the quarter also included a negative sales adjustment of 7,480 ounces due to reversals made for concentrate shipments previously sold but subsequently reversed due to the concentrate not being able to leave port.
Copper production of 2.8 million pounds for the year to date compared negatively to the comparative period by 20%, mainly as a result of lower copper grades. Copper sold was 81% lower than H1 2016, primarily due to the lack of exports of concentrate combined with lower copper production. Negative copper sales pounds for the quarter in the main relate to 342,273 pounds of copper concentrate, previously recorded as sales, but subsequently reversed due to the current export ban on mineral concentrates.
Cash costs of US$795 per ounce sold were 20% higher than H1 2016 (US$661), mainly due to the lower production base (US$189/oz), increased contracted services costs (US$76/oz) driven by increased mine development costs and lower co-product revenue (US$67/oz). This was partly offset by lower sales related costs due to lower sales volumes (US$92/oz), lower consumable costs due to optimised usage and improved unit costs (US$35/oz) and lower maintenance costs (US$34/oz).
AISC per ounce sold for the first half of US$1,340 was 38% higher than H1 2016 (US$970) driven by the impact of lower sales ounces on individual cost items ($264/oz), higher cash cost as explained above (US$134/oz) and higher capitalised development costs ($32/oz), slightly offset by lower sustaining capital spend ($36/oz). Should we have been able to sell all ounces produced, AISC would have been approximately US$1,140 per ounce.
Capital expenditure for the first half before reclamation adjustments amounted to US$40.6 million, slightly lower than H1 2016 (US$40.7 million). This is the result of lower sustaining capital expenditure offset by higher capitalised development. Capital expenditure mainly consisted of capitalised underground development costs (US$31.1 million), investment in mobile equipment and component change-outs (US$2.9 million) and investment in fixed equipment and mining infrastructure including the West fan upgrade and underground ventilation raise boring (US$2.9 million).
Buzwagi
Key statistics
| Three months ended 30 June | Six months ended 30 June | |||||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | ||
| Key operational information: | ||||||
| Ounces produced | oz | 66,228 | 43,156 | 126,084 | 80,219 | |
| Ounces sold | oz | 15,895 | 42,971 | 53,094 | 80,404 | |
| Cash cost per ounce sold1 | US$/oz | 705 | 948 | 697 | 1,052 | |
| AISC per ounce sold1 | US$/oz | 762 | 1,019 | 770 | 1,124 | |
| Copper production | Klbs | 3,095 | 2,915 | 6,253 | 4,900 | |
| Copper sold2 | Klbs | (826) | 2,829 | 705 | 4,929 | |
| Mining information: | ||||||
| Tonnes mined | Kt | 4,297 | 5,497 | 9,564 | 11,423 | |
| Ore tonnes mined | Kt | 2,898 | 1,302 | 4,951 | 2,605 | |
| Processing information: | ||||||
| Ore milled | Kt | 1,119 | 1,054 | 2,195 | 2,182 | |
| Head grade | g/t | 1.9 | 1.3 | 1.8 | 1.2 | |
| Mill recovery | % | 96.6% | 94.8% | 96,7% | 94.6% | |
| Cash cost per tonne milled1 | US$/t | 10 | 39 | 17 | 39 | |
| Capital Expenditure | ||||||
| - Sustaining capital | US$('000) | 724 | 1,081 | 865 | 2,231 | |
| - Capitalised development | US$('000) | - | - | - | - | |
| 724 | 1,081 | 865 | 2,231 | |||
| - Non-cash reclamation asset adjustments | US$('000) | 79 | 1,586 | (1) | 3,007 | |
| Total capital expenditure | US$('000) | 803 | 2,667 | 864 | 5,238 | |
1These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to “Non-IFRS measures” on page 28 for definitions.
2Negative sales quantities relate to the reversal of sales recorded during Q1 2017.
Operating performance
Gold production for the first half of 126,084 ounces was 57% higher than the comparative period in 2016 mainly due to a 50% increase in grade as a result of higher grade ore mined from the main ore zone at the bottom of the stage 3 pit in H1 2017 compared to the focus on waste movement in the first half of 2016 in order to mine the stage 3 pushback. This was further assisted by a 2% increase in mill recoveries due to improved mill availability and improved milling rates.
Production during the quarter was comprised of 40,210 ounces of gold in concentrate and 26,027 ounces of gold in doré, amounting to a total of 80,202 ounces gold in concentrate and 45,882 ounces gold in doré for the first half of the year.
Gold sold for the year to date amounted to 53,094 ounces, 34% lower than H1 2016 and 58% lower than production, a direct result of the inability to export concentrate from early March 2017 slightly offset by a higher production base compared to the comparative period. Sales ounces for the quarter also included a negative sales adjustment of 10,724 ounces due to reversals made for concentrate shipments previously sold but subsequently reversed due to the concentrate not being able to leave port.
Copper production of 6.3 million pounds for the year to date was 28% higher than the comparative period mainly due to increased copper grades. Copper sold was 86% lower than H1 2016, primarily due to the lack of mineral concentrate exports. Negative copper sales pounds for the quarter in the main relate to 781,423 pounds of copper concentrate, previously recorded as sales, but subsequently reversed due to the current export ban on mineral concentrates.
Total tonnes mined of 9.6 million tonnes were 16% lower than H1 2016, primarily due to the focus of mining at the bottom of the pit in H1 which contains more ore tonnes compared to waste movement during H1 2016 resulting in 90% higher ore tonnes mined during the first half of 2017.
Cash costs for the first half of US$697 per ounce sold were significantly lower than H1 2016 (US$1,052/oz), primarily driven by the impact of the higher production base (US$315/oz), lower sales related cost due to lower sales volumes (US$88/oz), lower consumable spend due to lower unit costs and optimisation of usage (US$115/oz). This was partly offset by lower co-product revenue in the form of copper concentrates (US$177/oz). As a result of the significant inventory credit resulting from the lack of sales, cash cost per tonne milled of US$17 per tonne was significantly lower than the previous period.
AISC per ounce sold of US$770 was 31% lower than the H1 2016. This was mainly driven by lower cash costs as explained above (US$354/oz). Should we have been able to sell all ounces produced, AISC would have been approximately US$589 per ounce.
Capital expenditure before reclamation adjustments of US$0.9 million was 61% lower than H1 2016 (US$2.2 million). Capital expenditure for the year to date consisted of the corrosion treatment of the process plant and investment in tailings storage facility.
North Mara
Key statistics
| Three months ended 30 June | Six months ended 30 June | |||||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | ||
| Key operational information: | ||||||
| Ounces produced | oz | 83,110 | 100,016 | 179,578 | 174,737 | |
| Ounces sold | oz | 84,390 | 95,540 | 178,130 | 169,840 | |
| Cash cost per ounce sold1 | US$/oz | 476 | 382 | 441 | 427 | |
| AISC per ounce sold1 | US$/oz | 758 | 707 | 736 | 720 | |
| Open pit: | ||||||
| Tonnes mined | Kt | 3,896 | 4,120 | 7,750 | 7,234 | |
| Ore tonnes mined | Kt | 733 | 620 | 1,536 | 1,395 | |
| Mine grade | g/t | 1.7 | 2.1 | 1.8 | 1.8 | |
| Underground: | ||||||
| Ore tonnes trammed | Kt | 162 | 85 | 316 | 210 | |
| Mine grade | g/t | 8.4 | 13.8 | 9.0 | 11.9 | |
| Processing information: | ||||||
| Ore milled | Kt | 709 | 705 | 1,419 | 1,436 | |
| Head grade | g/t | 4.0 | 4.8 | 4.3 | 4.1 | |
| Mill recovery | % | 92.3% | 92.3% | 92.5% | 91.4% | |
| Cash cost per tonne milled1 | US$/t | 57 | 52 | 55 | 50 | |
| Capital Expenditure | ||||||
| - Sustaining capital2 | US$('000) | 5,921 | 7,703 | 12,177 | 10,081 | |
| - Capitalised development | US$('000) | 15,485 | 19,396 | 33,282 | 31,051 | |
| - Expansionary capital | US$('000) | 2,953 | 372 | 4,489 | 458 | |
| 24,359 | 27,471 | 49,948 | 41,590 | |||
| - Non-cash reclamation asset adjustments | US$('000) | (180) | 3,075 | (56) | 6,252 | |
| Total capital expenditure | US$('000) | 24,179 | 30,546 | 49,892 | 47,842 | |
1These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ‘Non-IFRS measures” on page 28 for definitions.
2 Includes land purchases recognised as long term prepayments
Operating performance
Gold production for the first half of 179,578 ounces was slightly higher than in H1 2016. This was a result of 5% higher head grade driven by the preferential processing of higher grade ore from the Nyabirama pit as well as continued high grades from the Gokona underground mine, combined with a 1% improvement in recoveries. Gold ounces sold for the year of 178,130 ounces were 5% higher than the comparative period and broadly in line with production.
Ore tonnes from underground mining were 50% higher in the first half, due to Gokona underground development providing access to more stopes compared to H1 2016. Cemented Aggregate Fill (CAF) continues to be placed in primary stopes, though further work is required on the plant to ensure that forecast fill volumes can be maintained.
Cash costs of US$441 per ounce sold were 3% higher than H1 2016 (US$427/oz), mainly driven by higher direct mining costs due to increased labour, fuel and consumable costs (US$52/oz), partly offset by higher capitalised development cost (US$23/oz) and the higher production base (US$9/oz).
AISC of US$736 per ounce sold was 2% higher than H1 2016 (US$720/oz) primarily due to higher cash costs (US$14/oz), higher capitalised development costs (US$13/oz) and higher sustaining capital expenditure (US$12/oz) offset by the impact of increased sales volumes (US$14/oz).
Capital expenditure for the year before reclamation adjustments of US$49.9 million was 20% higher than in H1 2016 (US$41.6 million). Key capital expenditure include capitalised stripping costs (US$25.9 million), capitalised underground development costs (US$7.4 million), capitalised drilling expenditure (US$4.5 million) and investment in mobile equipment and component change-outs (US$3.7 million). In addition, US$1.2 million was spent on land acquisitions primarily around the Nyabirama open pit. Land acquisition costs are included in capital expenditure above as they are included in AISC but are treated as long term prepayments on the balance sheet.
Exploration Review
Brownfield Exploration
Tanzania
Significant brownfield programmes and budgets were approved for 2017 for North Mara to undertake surface and underground drilling activities at Gokona, Nyabirama, and Nyabigena. Underground drilling also continues on the Reef 2 series at Bulyanhulu to increase confidence in the resources and reserves in the Reef 2 Central area.
North Mara
Gokona Underground
A total of 55 holes for 7,593 metres of extension and infill drilling were completed at Gokona underground during H1 2017. Significant drilling activity during H1 was focused on delineating the western extension of the “Golden Banana” (East Zone) lode mineralisation between the Gokona Fault and the completed Gokona open pit. Several wide and high grade intercepts were returned from this drill programme extending the previously modelled mineralisation including:
Additionally, several high grade intercepts were returned adjacent to the Gokona Fault on the east side of the fault extending the previously modelled mineralisation in this area, including:
Note: * delineates results previously released in Q1 report
In the second half of 2017, underground diamond core drilling will continue to test the deeper fault offset extension of the Gokona East mineralisation, test continuity of higher grade mineralisation beneath the existing open pit and immediately west of the Gokona Fault, commence drilling of the Gokona Central area below the open pit, and continue grade control drilling of Gokona West. The results from this drilling will be incorporated as part of the updating of the Mineral Resource Model in order to deliver increased confidence, additional mining areas in the upper part of the deposit; and confirm and define targets for on-going extensional diamond drilling. The planned programme will comprise of approximately 75,000 metres of drilling over the next two years, with approximately 45,000 metres to be drilled in 2017.
Nyabirama
The second stage of the surface diamond core drilling programme adjacent to the Nyabirama pit was completed in March, and a subsequent programme of infill drilling to approximately 50m drill spacing commenced and was ongoing at the end of H1 2017. A total of 22 holes for 12,985 metres were completed during H1 2017. This drilling has been successful in delineating the down-dip and down-plunge extension of higher grade quartz-vein lode structures to a vertical depth of approximately 950m below surface and approximately 800m down-plunge to the south-west of the current open pit.
Better results received during H1 included:
The results of the infill programme will be incorporated into a Mineral Resource model to form the basis for further study on a potential underground development to further test the system and enable underground production by the time of the completion of the open pit in 2021.
Nyabigena
A total of 8 holes for 3,955 metres of the planned programme of approximately 10,000m of surface diamond core drilling were completed during the first half of 2017 at Nyabigena. This programme was designed to test the continuity of mineralisation and structural framework below the existing open pit. Initial results returned broad zones of low grade gold mineralisation with narrow restricted higher grade zones, but also confirmed some of the interpreted structural offsets. The programme was suspended in the latter part of H1 to focus on surface drilling in higher priority areas and reduce overall site expenditure. The drilling results will be incorporated into an updated geological model and Mineral Resource estimate in due course.
Bulyanhulu
Reef 2 Central
Underground diamond core drilling in H1 2017 was primarily focused on infill drilling of Reef 2 to increase the level of confidence in the Mineral Resource, and testing the Reef 1 structure in areas where limited to no historic drill testing has been undertaken. A total of 117 underground diamond drill core holes were completed for 30,412 metres during H1 2017, testing both the Reef 1 and Reef 2 structures.
In order to increase the understanding of the Reef 2 series of veins, tighter spaced definition drilling (50m x 50m grid) commenced in 2016 from existing underground development platforms in the “Reef 2m Central” area. The drilling coverage tested an area of approximately 570m vertical and 600m in strike length.
Based on the results received to date the Reef 2m Central vein is displaying good continuity and has extended the mineralisation a further 100m vertically, and a further 150m in strike. There is a notable average grade increase of approximately 25% for the drilled area. Implications from all the drilling to date is that the overall tonnes in the resource may go down slightly but there is an overall grade increase and subsequent ounce increase.
Definition drilling will continue in H2 2017 across the Reef 2m Central in order to define the economic limits along strike and confirming the lower vertical limit. Better results during the period, all true width, include:
Greenfield Exploration
Kenya
West Kenya Project
During H1 2017, we announced the maiden NI 43-101 compliant Inferred Mineral Resource Estimate (MRE) on the Liranda Corridor, within our West Kenya Project. The Inferred MRE of 3.46 million tonnes at 12.1 grams per tonne for 1.31 million ounces is primarily located on three main zones of mineralisation at the Acacia prospect. The gold mineralisation at Acacia is associated with shear zones ranging in width from 0.5 metres to 10 metres (averaging 3 metres true width, dependent on the zone), hosted by a mafic volcanic sequence. The strike lengths of the explored sections of the main mineralised zones at Acacia vary between 200m and 600m and the resource is currently defined down to a vertical depth of 750m with the structures open down plunge.
In addition, we identified mineralised zones on the Bushiangala prospect, approximately one kilometre away from the Acacia prospect, but at this stage this material remains unclassified due to drill density and the need to further understand the controls on the mineralisation and its continuity. Recent results from the Bushiangala prospect include: 3.0m @ 14.0 g/t Au from 386m, 1.0m @ 18.4 g/t Au from 389m and 5.0m @ 4.13 g/t Au from 304m. Based on the work undertaken up to February 2017, the current scale of the mineralisation at Bushiangala is between 0.60Mt and 1.60Mt at a grade between 6.0g/t Au and 10.0g/t Au, for a metal target of between 190,000 ounces and 300,000 ounces of contained gold. A key element of the 2017 drilling programmes at Bushiangala is to both move this existing target mineralisation into the Inferred Resource category and to expand the scale of the targeted mineralisation.
During H1 2017, a total of 68 diamond holes were completed or were underway at period end for 33,420 metres, with seven diamond core drill rigs drilling on various prospects. Current drilling on the Acacia prospect is targeting a significant expansion to the resource through testing up and down plunge extensions, as well as, infill drilling in areas of structural complexity and areas that previously returned lower grade results.
Drilling during H1 continued to intersect significant high grade results, however at the end of June we had approximately 23 holes with assays pending due to the need to send samples to South Africa rather than to Tanzania, due to impact of the current export ban. As a result, the majority of the results received during the period are from the first quarter, although visible gold has been seen in 8 of the 23 holes with assays pending. Better results received during H1 are:
Note: * - holes reported during Q1 2017
The current drill programme consists of approximately 48,000 metres of diamond core drilling, planned to be completed during Q3 2017, with the objective of increasing the Acacia Prospect Inferred resource, producing an initial Inferred resource on the Bushiangala Prospect, and testing nearby prospects east of the Acacia Prospect, namely the Shigokho and Shibunane Prospects. We are targeting a significant increase in the resource to 2 million ounces prior to the end of 2017. We also plan to commence a scoping study looking at the potential for an underground mining operation during H2 2017.
Burkina Faso
During H1 2017 we continued to explore our properties in the highly prospective Houndé Belt in southwest Burkina Faso. Acacia currently has four joint ventures and an interest in over ~2,700km2 of prospective greenstone belt. Acacia manages all of the joint ventures. A major component of H1 2017 work programmes, apart from drilling, was to review the structural architecture of land holding and complete a target generation exercise using airborne aeromagnetic and radiometric data and ground IP geophysical data where available; these target generation layers are now being used with our surface geochemical data layers to develop priority drilling targets, and to date we have delineated more than 65 targets warranting follow-up by either mapping or reconnaissance drilling.
South Houndé Joint Venture – current ownership 50%, next stage earn-in to 70%
At the South Houndé JV project we continued field-based exploration activities focused both on resource extensions to the Tankoro Resource and regional exploration programmes searching for new discoveries. Acacia has taken over management of the South Houndé JV and all field activities as of 1st January. During H1 2017 work continued to focus on the Tankoro Resource area (MM and MC Zones), the Tankoro Corridor prospects (Tankoro SW, Guy, Phantom and Phantom East) and regional targets (Ouangoro, Tyikoro, Poyo/Werienkera and Bini West). A total of 462 Aircore (AC) holes were drilled for a total of 26,957 metres and 18 RC/Diamond holes were drilled for a total of 5,740m. In addition to this, rock chips (180) and termite mound (97) samples were collected on regional targets.
Tankoro - MM and MC Zones
During H1 we continued a programme of drilling to test the down-plunge extensions of higher grade gold mineralisation related interpreted cross structures at the MM and MC Zones within the Tankoro resource. A “results based” phased strategy has been adopted “cycling” the rig between the Chewbacca, Yoda, Anakine and Jabba zones within the MM and MC parallel mineralised zones. All holes drilled to date have intersected the targeted porphyries and cross structures, however, in the majority of cases the high-grade shoots are either lower grade than expected, or of shorter strike extend that expected. The best potential at this stage appears to be depth extensions on the MC Zone where drilling has identified multiple mineralised porphyries and gold mineralisation in the surrounding intercalated sediments.
Better results from MM and MC Zone included:
The current phase of diamond core and RC drilling continues to target interpreted high grade domains associated with cross-structures and is applying the learnings from the initial holes. Results from more recent drilling are pending and expected to be received during early H2 2017.
Tankoro Corridor – Phantom, Phantom East, Guy and Southwest Extensions
RC and diamond core drilling on the Tankoro Corridor targeting the northeast extension of the mineralised system at the Phantom and Phantom East prospects was ongoing at the end of H1, with potential mineralised zones, associated with sericite-pyrite-arsenopyrite alteration, observed in holes from both prospects. We also completed a single diamond hole at the Guy Prospect, with the hole cutting approximately 40m of sericite-carbonate+/-sulphide alteration and varying intensity of quartz veining. In the far south west of the Tankoro Corridor we also commenced a programme of regional Aircore drilling following up large areas of gold-in-soil geochemistry associated with IP chargeability anomalies. At the end of the period, assay results for the various Tankoro Corridor programmes were still pending due to a backlog of more than one month in the Burkina Faso assay lab. Results are expected to be received throughout Q3 2017.
Ouangoro Anomaly
Aircore drilling commenced at the beginning of February on the Ouagoro Anomaly with the plan to drill 19 regional 1km spaced traverses across a 15-20 kilometre x 4 kilometre zone of semi-continuous gold-in-soil anomalism along several interpreted NNE-trending linear geophysical features. To date 10 traverses have been drilled for 11,490 metres, with results for first eight traverses being received at period-end. Positive results have been returned from all traverses including better results of:
Gold mineralisation and anomalism in drill chips, and observed in artisanal workings, is typically associated with quartz veins in sheared siltstone and sandstone units intruded by interpreted quartz-feldspar porphyries, with fresher drill chips show carbonate and silica-sericite alteration. Regionally the anomalous gold zones intersected in Aircore drilling occur on interpreted 020-trending shear zones. It is anticipated that infill Aircore drilling (200m and 400m spaced lines) will be completed as phase 2 of the programme during H2 2017 and H1 2018, once all results are received and interpreted.
Central Houndé Joint Venture – current ownership 51%, next stage earn-in to 80%
Surface geochemical sampling undertaken over the past 24 months has identified several very encouraging zones of gold anomalism coincident with the interpreted NE-trending Legue-Bongui structural corridor, including an 8km x 2km anomalous gold zone. Additional interpretative work has identified 35 targets associated with mapped alteration, artisanal sites, mineralised rock chips and/or pathfinder geochemistry (arsenic, molybdenum etc) warranting follow-up.
Work during the H1 included mapping and lithological sampling, infill soil sampling, multi-element analysis, RC drilling and a structural interpretation using all available datasets. During the half, a total of 596 soil samples and 43 rock chips were collected. During the mapping a number of west-north west trending mineralised structures were identified in the Legue NW Corridor, and rock chips taken along these structures returned a number of significant results. In total 21 of 49 rock chip samples returned assays >0.1g/t up to 77.4g/t gold, including assays of 5.95g/t, 19.1g/t, 28.1g/t, 62.8g/t and 77.4g/t. The anomalous rock chip samples are associated with shear mafic volcanic rocks and boudinaged quartz vein zones. RC drilling in the Legue NW Corridor to test these anomalous rock chip zones commenced early June and at the end of H1 a total of 9 RC holes for a total of 1,421 metres had been completed. Once all results have been received and this phase of the drilling programme has been completed we will assess what is required for phase 2 of the programme.
Pinarello & Konkolikan Joint Venture (Canyon Resources Limited) – current ownership 75%, potential to earn 100%
Surface geochemical sampling undertaken over the past 2 years has identified several very encouraging zones of gold anomalism coincident with the interpreted structural corridors, magnetic features and surface IP geophysical anomalies. During the quarter we completed a structural targeting exercise, reviewed the surface gold anomalies from soil sampling, and undertook multi-element geochemical analysis, using a portable XRF, of all samples from the regional soil sampling programmes. As a result of this targeting exercise we delineated 28 targets across the Pinarello project area, and we commenced field validation, geological mapping and further surface sampling programmes on priority target areas.
We continue to follow up the previous season’s surface geochemical and Aircore drilling programs at Pinarello. A total of 421 Aircore holes for an aggregate of 23,089 metres were completed on the Tankoro Corridor SW extension, Gaghny, Tangalobe, Dafala and Dopala prospects. More significant results from 2016 / 2017 Aircore drilling campaigns were followed up with 37 RC holes for an aggregate of 5,803 metres. While not all results are available yet, results received to date are mixed with only a small number of significant gold intercepts warranting further follow-up.
Results from Aircore drilling along the Tangaloble and Tankoro Corridors is considered positive with better results of: 3m @ 0.77g/t from 29m; 3m @ 0.72g/t Au from 5m; 4m @ 1.64g/t Au from 49m; 2m @ 6.0g/t Au from 57m; 6.0m @ 1.18 g/t Au from 14.0m, including 2.0m @ 3.09 g/t Au from 14.0m; 4m @ 0.68g/t Au from 20m, and 8m @ 0.52g/t Au from 14m mostly associated with quartz veins, oxidised sulphides and haematite.
Results from RC drilling at Gaghny and Tangalobe returned a number of anomalous intercepts associated with sericite-fuchsite-carbonate altered sediments and quartz veins-sericite-heamatite altered sediments respectively. Better intercepts include: 2.0m @ 0.61g/t Au from 99m and 1m @ 3.07g/t Au from 106m; 1m @ 3.24 g/t Au from 92m; 13.0m @ 1.06 g/t Au from 136m and 5.0 m @ 0.68 g/t Au from 141m; 1m @ 4.85 g/t Au from 1m and 10m @ 0.44 g/t Au from 52m.
Acacia has now earned 75% equity in the project and we have therefore entered the contributory/dilution phase of the JV agreement. Canyon Resources, our joint venture partner has elected to dilute, and the current programmes will increase Acacia’s equity to approximately 89%. Programmes for H2 2017 include RC drilling, Aircore drilling, geological mapping, prospect reviews, further infill soil sampling and trenching.
Frontier JV – earning 100% through option payments
Regional regolith and geological mapping has been completed for both licences. A regional 800m x 400m reconnaissance BLEG soil sampling programme, combined with termite mound, rock chip and quartz lag sampling programmes has been completed. This work has identified a number of significant large scale gold-in-soil anomalies (soils up to 3g/t Au). A 200m x 200m infill commenced but has yet to be completed. A total of 6,035 soil, 44 rock chip and 1,043 termite samples were collected during H1 2017. In addition to this a detailed structural magnetic interpretation and targeting exercise has been completed. This interpretation integrated geological and regolith mapping, Landsat, Aster and recently acquired high resolution airborne magnetic and radiometric data. A number of high quality targets have been selected for reconnaissance Aircore drilling. During H2 2017 work will comprise data collation and interpretation, infill soils sampling, multi-element work and reconnaissance Aircore drilling of high priority coincident geochemical and structural/magnetic targets.
Mali
In Mali we continued to delineate surface gold-in-soil anomalies, already defined in late 2016, through mapping and surface IP geophysical surveys, and commenced drilling programmes on the resultant targets. At the same time, we continued to build our land position in the Senegal-Mali Shear Zone (SMSZ) with a the grant of a further two land packages, one under joint venture (Bou Bou) and the other 100% Acacia (Gourbassi), Acacia now holds 5 exploration permits covering 191km2 on the SMSZ.
Tintinba - Bane Project – earning 95% through option payments
The Tintinba-Bane Project consists of three permits covering approximately 150km2. These properties are located within the Kénéiba Inlier of Western Mali, along the world class Senegal-Mali-Shear-Zone (SMSZ), which hosts more than 50 million ounces of gold endowment. During the half, a ground-based gradient array induced polarisation geophysical survey was completed (31 line km) and interpreted. Results from IP, soils, drilling and mapped and interpreted geology have been used to refine existing and define new targets for drill testing. At least 25 targets with co-incident IP chargeability, resistivity, and surface gold-in-soil anomalism have been identified.
RC drilling commenced in mid-March 2017 aimed at testing around 18 targets in total with single drill fences to test for gold mineralisation and to understand the geology and alteration of each target in order to rank these targets moving forward. A total of 54 RC holes for 7,260 metres and 2 diamond drill holes for 206 metres were drilled. Drilling to date can be considered very positive as 5 of the 9 gold anomalies where results have been received have returned positive gold. Assay results are still pending for a number of drill traverses, but better higher grade results returned to date include; 4m @ 18.7g/t and 4m @ 5.62g/t, and regionally significant drill results returning broad zones of gold anomalism include; 13m @ 1.11g/t, 15m @ 0.50g/t, 13m @ 0.50g/t, 25m @ 0.45g/t including 7m @ 1.01g/t, 17m @ 0.71g/t and 19m @ 0.55g/t.
Given the discovery history of several >3Moz deposits in the SMSZ, these results and the associated alteration on essentially single RC fences, across large-scale gold-in-soil anomalies can be considered very significant and warrant follow-up drilling.
Bourdala JV – earning 100% through option payments
The Boudala JV is a joint venture with a local company over the Bou Bou licence located approximately 15km from the centroid of the Tintinba JV further to the south. The property is located within the central portion of the Kedougou-Kenieba Inlier and just to the east of the highly prospective Senegal-Mali Shear Zone. Acacia can earn up to 100% of the project through a series of staged payments over a period of 36 months.
During H1 2017, six RC holes for 800 metres were completed across the Boubou Artisanal Prospect on the Bourdala JV licence. These returned highly anomalous results including: BORC005: 64m @ 0.23g/t from 10m, BORC004: 26m @ 0.31g/t from 72m and 26m @ 0.58g/t from 104m. These results are encouraging given that the results occur in consecutive holes on the drill traverse and define a 50 metre wide zone of gold anomalism, within a 2km long artisanal site, and hole BORC005 ended in mineralisation.
Gourbassi Est – 100%
During H1 2017, the Gourbassi Est convention was signed and arête for the licence was received. The licence is located immediately west of the Tintinba/Bane Project in the central Senegal Mali Shear Zone area of the Kedougou-Kenieba Inlier. The property is located to the west of the SMSZ in an area dominated by footway splays to the SMSZ. The programme for H2 2017 is to review the historic data and complete mapping and surface sampling programmes. Dependent on results of this first pass work we would complete RC and/or diamond core drilling during H1 2017.
Tanzania
Nyanzaga Joint Venture
During the period, OreCorp Limited published the results of the Pre-Feasibility Study (“PFS”) on the Nyanzaga Project. The PFS, led by Lycopodium Minerals Pty Ltd of Perth, Western Australia, delivered an optimal development scenario of a 4Mtpa concurrent open pit (“OP”) and underground (“UG”) operation for pre-production capital costs estimate of US$287M, which includes a US$33M contingency. The concurrent mining schedule significantly reduced the low grade stockpiling scenario considered in the Scoping Study and increased the OP contained ounces and life of mine (“LOM”) average mineralised material grade processed from 1.9 g/t gold in the Scoping Study to 2.0 g/t (+5%). Based on the PFS, the Project is expected to deliver an average gold production of 213koz per annum over a 12 year LOM, peaking at 249koz in Year 3 and totalling approximately 2.56Moz of gold produced over the LOM. The AISC and AIC are estimated to be US$838/oz and US$858/oz respectively over the LOM. Acacia and OreCorp have agreed the scope of the Definitive Feasibility Study (“DFS”) and this commenced in the second quarter.
OreCorp and Acacia continue to review and seek advice on the impact of the new legislation in Tanzania on the Nyanzaga Project. OreCorp has published an analysis of their preliminary view of the impact of the legislation which can be found on their website (www.orecorp.com.au) and indicates that the legislation may potentially have an adverse effect on the Nyanzaga Project. We note that regulations, which will assist the understanding of the implementation of the legislation, are not yet available and will be reviewed once they are.
Financial Review
The impact of the gold/copper concentrate export ban is evident in our financial performance, and most notably in cash flow generation. However, in an effort to minimising the impact, we have further increased our focus on cost control and capital allocation. The key aspects of our financial performance over the first half of 2017 is summarised below, and should be read in conjunction with the consolidated condensed interim financial information:
The following review provides a detailed analysis of our consolidated results for 6 months ended 30 June 2017 and the main factors affecting financial performance. It should be read in conjunction with the unaudited consolidated financial information and accompanying notes on pages 36 to 58, which have been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union (“IFRS”).
Revenue
Revenue for H1 2017 of US$391.7 million was US$113.3 million lower than H1 2016 due to a 22% decrease in gold sales volumes from Bulyanhulu and Buzwagi (88,525 ounces) offset by a 5% increase in sales ounces from North Mara and a 2% increase in the average net realised gold price from US$1,209 per ounce sold in H1 2016 to US$1,235 in H1 2017.
The decrease in revenue during the first half of 2017 was primarily driven by the ban on export of mineral concentrates which also resulted in a negative sales adjustment of 18,204 ounces, approximately US$22.0 million in revenues, due to reversals made for concentrate shipments sold in Q1 2017 due to the concentrate not being able to leave port.
The net realised gold price for the year to date of US$1,235/oz was US$3/oz lower than the average market price of US$1,238/oz due to the timing of sales. There were no realised losses related to gold hedges during H1 2017.
Included in total revenue is co-product revenue of US$5.8 million for the 2017 year to date, 71% lower than the prior period (US$20.3 million), this as a result of the lack of concentrate sales from early March 2017. The 2017 half year average realised copper price of US$2.99 per pound compared favourably to that of H1 2016 (US$2.13 per pound), and was mainly driven by the higher market price for copper. The benefit of a higher copper price is however not reflected in H1 2017 revenues due to a 83% decrease in copper sales volumes. Included in co-product revenue is a negative sales adjustment of 1.1 million copper pounds, approximately US$3.0 million in revenues, due to reversals made for concentrate shipments sold in Q1 2017 but subsequently reversed due to the concentrate not being able to leave port.
The impact of the ban during the first half of the year has meant that we have approximately 127,000 ounces of gold contained in unsold concentrate. In addition, we have approximately 8.3 million pounds of copper and 107,000 ounces of silver contained in unsold concentrate. If these have been sold, gross revenue and cashflow would have increased by approximately US$175 million.
Cost of sales
Cost of sales was US$244.0 million for H1 2016, representing a decrease of 31% on the prior year period (US$355.4 million). The key aspects impacting the cost of sales for the year include an 32% reduction in direct mining costs, primarily driven by higher capitalised mining costs including a credit of approximately US$63.3 million relating to a build-up of finished gold ounces, combined with lower depreciation and amortisation costs as a result of the lower production base at Bulyanhulu, lower sales related cost due to lower sales volumes and minimal realised losses on economic hedges due to majority of options reaching their settlement date during 2016.
The table below provides a breakdown of cost of sales:
(US$'000) |
Three months ended 30 June | Six months ended 30 June | |||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | |
| Cost of Sales | |||||
| Direct mining costs | 61,527 | 118,535 | 160,310 | 234,436 | |
| Third party smelting and refining fees | 1,417 | 6,782 | 6,738 | 13,639 | |
| Realised losses on economic hedges | 170 | 2,539 | 278 | 6,454 | |
| Royalty expense | 8,040 | 12,517 | 18,682 | 22,534 | |
| Depreciation and amortisation* | 23,417 | 43,166 | 57,959 | 78,376 | |
| Total | 94,571 | 183,539 | 243,967 | 355,439 | |
* Depreciation and amortisation includes credits relating to the depreciation component of the cost of inventory build-up of US$12.8 million for Q2 2017 (Q2 2016: US$0.9 million) and US$15.8 million for H1 2017 (H1 2016: US$5.7 million).
A detailed breakdown of direct mining expenses is shown in the table below:
(US$'000) |
Three months ended 30 June | Six months ended 30 June | ||||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | ||
| Direct mining costs | ||||||
| Labour | 23,859 | 21,728 | 47,261 | 43,789 | ||
| Energy and fuel | 21,161 | 21,387 | 44,604 | 41,875 | ||
| Consumables | 22,262 | 26,482 | 47,168 | 52,939 | ||
| Maintenance | 26,357 | 27,494 | 52,123 | 53,735 | ||
| Contracted services | 33,483 | 33,829 | 69,497 | 62,383 | ||
| General administration costs | 21,788 | 22,362 | 42,309 | 43,085 | ||
| Gross direct mining costs | 148,910 | 153,282 | 302,962 | 297,806 | ||
| Capitalised mining costs | (87,383) | (34,747) | (142,652) | (63,370) | ||
| Total direct mining costs | 61,527 | 118,535 | 160,310 | 234,436 | ||
Gross direct mining costs of US$303.0 million for H1 2017 were 2% higher than H1 2016 (US$297.8 million). The overall increase was driven by the following:
This was offset by:
Capitalised direct mining costs, consisting of capitalised development costs and investment in inventory is made up as follows:
(US$'000) |
Three months ended 30 June | Six months ended 30 June | |||||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | |||
| Capitalised direct mining costs | |||||||
| Capitalised development costs | (25,962) | (30,210) | (56,530) | (51,369) | |||
| Investment in inventory | (61,420) | (4,537) | (86,122) | (12,001) | |||
| Total capitalised direct mining costs | (87,382) | (34,747) | (142,652) | (63,370) | |||
Capitalised development costs were 125% higher than H1 2016, primarily driven by a build-up of concentrates in gold ounces at Bulyanhulu and Buzwagi resulting in an investment in inventory of US$86.1 million. The increase in capitalised development cost mainly relate to higher gross direct mining cost at North Mara resulting in 10% higher capitalised development during H1 2017.
Central costs
Total central costs amounted to US$4.7 million for H1 2017, a 84% decrease on H1 2016 (US$29.4 million) mainly driven by a non-cash share based payment revaluation credit as a result of the lower share price and share price performance compared to 2016, specifically when compared to our peers and the global mining index, impacting on the valuation of future share-based payment liabilities to employees. Acacia’s share price decreased by approximately 31% compared to December 2016. This was partly offset by a 28% increase in corporate administration costs as a result of higher legal and consulting fees paid, slightly offset by lower labour cost across all offices during H1 2017.
(US$'000) |
Three months ended 30 June | Six months ended 30 June | |||||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | |||
| Corporate administration | 5,878 | 4,469 | 12,520 | 9,771 | |||
| Share-based payments | (18,209) | 15,697 | (7,785) | 19,635 | |||
| Total central costs | 12,331 | 20,166 | 4,735 | 29,406 | |||
Exploration and evaluation costs
Exploration and evaluation costs of US$16.2 million were incurred in H1 2017, 45% higher than the US$11.2 million spent in H1 2016. The key focus areas for the half year were greenfield exploration programmes in West Kenya amounting to US$8.0 million and greenfield exploration programmes in West Africa amounting to US$7.2 million.
Corporate social responsibility expenses
Corporate social responsibility costs incurred for H1 2017 amounted to US$3.7 million compared to the prior year of US$4.6 million. Corporate social responsibility overheads and central initiatives in H1 2017 amounted to US$2.3 million and was higher compared to US$2.1 million in H1 2016. General community projects funded from the Acacia Maendeleo Fund amounted to US$1.4 million, which was US$1.2 million lower than in H1 2016, driven by the timing of projects starting.
Other charges
Other charges in H1 2017 amounted to US$19.6 million, compared to an income of US$2.2 million in H1 2016. The main contributors include foreign exchange losses of US$4.6 million, legal costs of US$4.6 million mainly relating to legal representation on historical court cases, retrenchment costs of US$3.3 million and Acacia’s ongoing programme of zero cost collar contracts to mitigate the negative impact of copper, rand and fuel market volatility, which resulted in a mark-to-market revaluation loss of US$2.4 million (as these arrangements do not qualify for hedge accounting these unrealised gains are recorded through profit and loss). The charges were partly offset by income of US$1.8 million generated through the sale of a mineral royalty previously held by Acacia.
Finance expense and income
Finance expense of US$5.5 million for H1 2017 was in line with H1 2016 (US$5.4 million). The key components were borrowing costs relating to the Bulyanhulu CIL facility (US$1.6 million) which were lower than the prior year due to a lower outstanding facility following repayments, lower accretion expenses of US$1.7 million relating to the discounting of the environmental reclamation liability and US$1.5 million relating to the servicing of the US$150 million undrawn revolving credit facility. Other costs include bank charges and interest on finance leases.
Finance income relates predominantly to interest charged on non-current receivables and interest received on money market funds. Refer to note 8 of the condensed financial information for details.
Taxation matters
The total income tax charge was US$37.0 million compared to the prior year expense of US$107.7 million. The current tax charge of US$31.8 million (H1 2016: US$64.4 million) was predominantly made up of current year income tax for North Mara, driven by year to date profitability, in combination with deferred tax charges of US$5.2 million (2016: US$43.3 million) which reflects movements in temporary differences. The tax expense for H1 2016 of US$107.7 million included US$69.9 million relating to tax provisions raised for historical tax disputes. The effective tax rate in H1 2017 amounted to 37% compared to 106% in H1 2016.
During H1 2017, we made provisional corporate tax payments of US$17.3 million relating to North Mara, which is based on the pro rata portion of North Mara’s expected full year profitability. These provisional corporate tax payments have been offset against the indirect tax receivable covered under the Memorandum of Settlement entered into with the Tanzanian Government in 2011, and as a result, were not paid in cash. In addition, during H1 2017 we have also made a prepaid tax payment of US$9.5 million relating to a advance payment on a dispute raised on claimed historical North Mara taxes, which was paid in cash.
Net earnings and earnings per share
As a result of the factors discussed above, net earnings for H1 2017 were US$62.5 million, against the prior year loss of US$6.1 million.
Earnings per share for H1 2017 amounted to US15.3 cents, an increase of US16.8 cents from the prior year loss per share of US1.5 cents. The increase was driven by the higher earnings, with no change in the underlying issued shares.
Adjusted net earnings and adjusted earnings per share
Adjusted net earnings for the first half was US$65.9 million compared to US$58.8 million in H1 2016. Net earnings in the periods as described above have been adjusted for the impact of items such as prior year tax provisions, discounting of indirect tax receivables, restructuring costs, insurance proceeds as well as legal settlements. Refer to page 30 for reconciliation between net profit and adjusted net earnings.
Adjusted earnings per share for H1 2017 amounted to US16.1 cents, an increase of US1.8 cents from H1 2016 adjusted earnings per share of US14.3 cents.
Financial position
Acacia had cash and cash equivalents on hand of US$175.9 million as at 30 June 2017 (US$317.8 million as at 31 December 2016). The Group’s cash and cash equivalents are with counterparties whom the Group considers to have an appropriate credit rating. Location of credit risk is determined by physical location of the bank branch or counterparty. Investments are held mainly in United States dollars, with cash and cash equivalents in other foreign currencies maintained for operational requirements.
During 2013, a US$142 million facility (“Facility”) was put in place to fund the bulk of the costs of the construction of the Bulyanhulu tailings retreatment project (“Project”). The Facility is collateralised by the Project, and has a term of seven years with a spread over Libor of 250 basis points. The seven year Facility is repayable in equal instalments (bi-annual) over the term of the Facility, after a two year repayment holiday period. The interest rate has been fixed at 3.6% through the use of an interest rate swap. The full facility of US$142 million was drawn in 2013. During 2017, the 4th repayment amounting to US$14.2 million in total was made. At 30 June 2017, the outstanding capital balance is US$85.2 million (30 June 2016: US$113.6 million).
The above complements the existing undrawn revolving credit facility of US$150 million, which runs until November 2019.
The net book value of property, plant and equipment increased from US$1.41 billion as at 30 June 2016 to US$1.47 billion as at 30 June 2017. The main capital expenditure drivers have been explained above, and have been offset by depreciation charges of US$69.7 million. Refer to note 12 to the condensed financial information for further details.
The current portion of inventories increased from US$195.7 million as at 30 June 2016 to US$280.7 million as at 30 June 2017. This was mainly due to an increase of US$83.6 million relating to finished goods. Total gold ounces on hand of 138,113 ounces as at 30 June 2017 comprised 126,931 ounces of gold in concentrate and 11,202 ounces of gold in doré.
Total indirect tax receivables increased from US$136.4 million as at 31 December 2016 to US$165.5 million as at 30 June 2017. The increase was mainly due to no VAT refunds received as a result of ongoing audits by the Tanzanian Revenue Authority on submitted VAT returns. Our gross increase in receivables, before the corporate tax prepayment offset, amounted to approximately US$47 million. This was partly offset by corporate tax prepayments of US$17.3 million and revaluation losses with the net increase in receivables being US$29.1 million.
The net deferred tax position was a liability of US$156.8 million as at 30 June 2016 compared to the liability of US$152.1 million as at 31 December 2016. This was mainly as a result of temporary difference at Buzwagi during the current period.
Net assets increased from US$1.86 billion as at 31 December 2016 to US$1.90 billion as at 30 June 2017. The increase reflects the current year income of US$62.5 million and the payment of the final 2016 dividend of US$34.4 million.
Cash flow generation and capital management
Cash flow
| (US$000) | Three months ended 30 June | Six months ended 30 June | |||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | |
| Cash (used in)/ generated from operating activities | (23,909) | 104,864 | 1,315 | 157,096 | |
| Cash used in investing activities | (47,250) | (46,347) | (94,786) | (80,272) | |
| Cash used in financing activities | (34,447) | (11,490) | (48,585) | (25,690) | |
| (Decrease)/ increase in cash | (105,606) | 47,027 | (142,056) | 51,134 | |
| Foreign exchange difference on cash | 50 | (99) | 151 | (45) | |
| Opening cash balance | 281,442 | 237,429 | 317,791 | 233,268 | |
| Closing cash balance | 175,886 | 284,357 | 175,886 | 284,357 | |
Cash flow from operating activities was US$1.3 million for H1 2017, a decrease of US$155.8 million from H1 2016 (US$157.1 million). The decrease relates to unfavourable working capital outflows of US$159.7 million compared to outflows of US$16.3 million in H1 2016, provisional income tax paid of US$17.3 million and a US$9.5 million corporate tax dispute deposit included in other current assets, compared to total tax payments of US$10 million in H1 2016 combined with the impact of lower operating profit mainly due to lost margins on lower gold sales volumes (US$10.7 million). This was offset by the impact of lower non-cash expenses of US$8.2 million which include unrealised gains on derivatives of US$2.4 million and foreign exchange differences of US$4.6 million.
The working capital outflow relates to a net increase in inventories on hand of US$113.2 million driven by the higher production base and lower sales volumes, and a net increase in indirect tax receivables on a cash basis of approximately US$30.0 million.
Cash flow used in investing activities was US$94.8 million for H1 2017, an increase of 18% when compared to H1 2016 (US$80.3 million), driven by higher capitalised development at both North Mara and Bulyanhulu, partly offset by lower sustaining capital expenditure at Bulyanhulu and Buzwagi.
A breakdown of total capital and other investing capital activities for 2017 is provided below:
| (US$’000) | Six months ended 30 June | |||
| (Unaudited) | 2017 | 2016 | ||
| Sustaining capital | (30,204) | (21,906) | ||
| Capitalised development | (64,337) | (59,489) | ||
| Expansionary capital | (5,523) | (1,211) | ||
| Total cash capital | (100,064) | (82,606) | ||
| Non-current asset movement1 | 5,278 | 2,334 | ||
| Cash used in investing activities | (94,786) | (80,272) | ||
| Capital expenditure reconciliation: | ||||
| Total cash capital | 100,064 | 82,606 | ||
| Land purchases | 1,247 | 2,824 | ||
| Movement in capital accruals | (8,855) | (258) | ||
| Capital expenditure | 92,456 | 85,172 | ||
| Land purchases classified as long term prepayments | (1,247) | (2,824) | ||
| Non-cash rehabilitation asset adjustment | 134 | 19,196 | ||
| Total capital expenditure per segment note | 91,343 | 101,544 | ||
1 Non-current asset movements relates to the movement in Tanzania government receivables, other long term assets and the sale of a mineral royalty.
Sustaining capital
Sustaining capital expenditure includes investment in mobile equipment and component change-outs (US$6.6 million), investment in fixed equipment and mining infrastructure including the West fan upgrade and underground ventilation raise boring at Bulyanhulu (US$9.7 million) and other sustaining capital expenditure across sites of US$13.9 million. During the first half, capital accruals from December 2016 of US$8.9 million were paid.
Capitalised development
Capitalised development includes North Mara capitalised stripping costs (US$25.9 million) and capitalised underground development (US$7.4 million) and Bulyanhulu capitalised underground development costs (US$31.1 million).
Expansionary capital
Expansionary capital expenditure consisted mainly of capitalised expansion drilling at North Mara (US$4.5 million) and Bulyanhulu (US$1.0 million).
Non-cash capital
Non-cash capital was a negative US$8.8 million and consisted mainly of a decrease in capital accruals (US$8.9 million) and reclamation asset adjustments (US$0.1 million). The reclamation adjustments were driven by changes in US risk free rates driving changes in discount rates and closure costs assumptions.
Other investing capital
During H1 2017 North Mara incurred land purchases totalling US$1.2 million (H1 2016: US$2.8 million).
Cash flow used in financing activities for H1 2017 of US$48.6 million, an increase of US$22.9 million from US$25.7 million in H1 2016. The outflow relates to payment of the final 2016 dividend of US$34.4 million and the payment of the 4th instalment of the borrowings related to the Bulyanhulu CIL facility totalling US$14.2 million.
Dividend
The final 2016 dividend of US8.4 cents per share was paid to shareholders on 25 May 2017. The Board of Directors have not recommended an interim dividend for 2017 as a result of the negative free cashflow generation over H1 2017, in line with our dividend policy.
Significant judgements in applying accounting policies and key sources of estimation uncertainty
Many of the amounts included in the condensed consolidated financial information require management to make judgements and/or estimates. These judgements and estimates are continuously evaluated and are based on management’s experience and best knowledge of the relevant facts and circumstances, but actual results may differ from the amounts included in the condensed consolidated financial information included in this release. Information about such judgements and estimation is included in the accounting policies and/or notes to the consolidated financial statements, and the key areas are summarised below.
Areas of judgement and key sources of estimation uncertainty that have the most significant effect on the amounts recognised in the condensed consolidated financial statements include:
Non-IFRS Measures
Acacia has identified certain measures in this report that are not measures defined under IFRS. Non-IFRS financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing Acacia’s financial condition and operating results, and reflects more relevant measures for the industry in which Acacia operates. These measures are not in accordance with, or a substitute for, IFRS, and may be different from or inconsistent with non-IFRS financial measures used by other companies. These measures are explained further below.
Net average realised gold price per ounce sold is a non-IFRS financial measure which excludes from gold revenue:
- Unrealised gains and losses on non-hedge derivative contracts; and
- Export duties
It also includes realised gains and losses on gold hedge contracts reported as part of cost of sales.
Net average realised gold price per ounce sold have been calculated as follow:
| (US$000) | Three months ended 30 June | Six months ended 30 June | |||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | |
| Gold revenue | 160,231 | 272,728 | 385,859 | 484,614 | |
| Less: Realised gold hedge losses | - | - | - | - | |
| Net gold revenue | 160,231 | 272,728 | 385,859 | 484,614 | |
| Gold sold (ounces) | 127,694 | 216,782 | 312,438 | 400,963 | |
| Net average realised gold price (US$/ounce) | 1,255 | 1,258 | 1,235 | 1,209 | |
Cash cost per ounce sold is a non-IFRS financial measure. Cash costs include all costs absorbed into inventory, as well as royalties, and production taxes, and exclude capitalised production stripping costs, inventory purchase accounting adjustments, unrealised gains/losses from non-hedge currency and commodity contracts, depreciation and amortisation and corporate social responsibility charges. Cash cost is calculated net of co-product revenue. Cash cost per ounce sold is calculated by dividing the aggregate of these costs by total ounces sold.
The presentation of these statistics in this manner allows Acacia to monitor and manage those factors that impact production costs on a monthly basis. Cash costs and cash cost per ounce sold are calculated on a consistent basis for the periods presented.
The table below provides a reconciliation between cost of sales and total cash cost to calculate the cash cost per ounce sold.
(US$'000) |
Three months ended 30 June | Six months ended 30 June | |||||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | |||
| Total cost of sales | 94,571 | 183,539 | 243,967 | 355,439 | |||
| Deduct: depreciation and amortisation* | (23,417) | (43,166) | (57,959) | (78,376) | |||
| Deduct: Co-product revenue | 2,468 | (11,309) | (5,805) | (20,333) | |||
| Total cash cost | 73,622 | 129,064 | 180,203 | 256,730 | |||
| Total ounces sold | 127,694 | 216,782 | 312,438 | 400,963 | |||
| Total cash cost per ounce sold | 577 | 595 | 577 | 640 | |||
* Depreciation and amortisation includes the depreciation component of the cost of inventory sold
All-in sustaining cost (AISC) is a non-IFRS financial measure. The measure is in accordance with the World Gold Council’s guidance issued in June 2013. It is calculated by taking cash cost per ounce sold and adding corporate administration costs, share-based payments, reclamation and remediation costs for operating mines, corporate social responsibility expenses, mine exploration and study costs, realised gains and/or losses on operating hedges, capitalised stripping and underground development costs and sustaining capital expenditure. This is then divided by the total ounces sold. A reconciliation between cash cost per ounce sold and AISC for the key business segments is presented below:
| (Unaudited) | Three months ended 30 June 2017 | Three months ended 30 June 2016 | |||||||
| (US$/oz sold) | Bulyanhulu | North Mara | Buzwagi | Group* | Bulyanhulu | North Mara | Buzwagi | Group* | |
| Cash cost per ounce sold | 813 | 476 | 705 | 577 | 662 | 382 | 948 | 595 | |
| Corporate administration | 44 | 21 | 81 | 46 | 16 | 17 | 23 | 21 | |
| Share based payments | (38) | (13) | (78) | (143) | 15 | 8 | 14 | 72 | |
| Rehabilitation | 23 | 10 | 11 | 13 | 8 | 9 | 2 | 7 | |
| CSR expenses | 9 | 10 | (3) | 12 | 7 | 7 | 6 | 8 | |
| Capitalised development | 547 | 184 | - | 239 | 195 | 203 | - | 160 | |
| Sustaining capital | 160 | 70 | 46 | 91 | 55 | 81 | 26 | 63 | |
| Total AISC | 1,558 | 758 | 762 | 835 | 958 | 707 | 1,019 | 926 | |
* The group total includes a credit of US$95/oz of unallocated corporate related costs in Q2 2017, and a cost of US$66/oz in Q2 2016.
| (Unaudited) | Six months ended 30 June 2017 | Six months ended 30 June 2016 | |||||||
| (US$/oz sold) | Bulyanhulu | North Mara | Buzwagi | Group* | Bulyanhulu | North Mara | Buzwagi | Group* | |
| Cash cost per ounce sold | 795 | 441 | 697 | 577 | 661 | 427 | 1,052 | 640 | |
| Corporate administration | 36 | 23 | 48 | 40 | 21 | 24 | 25 | 24 | |
| Share based payments | (4) | (2) | (6) | (25) | 11 | 7 | 11 | 49 | |
| Rehabilitation | 16 | 10 | 7 | 11 | 7 | 9 | 3 | 7 | |
| CSR expenses | 8 | 8 | 7 | 12 | 5 | 11 | 7 | 12 | |
| Capitalised development | 382 | 187 | - | 206 | 189 | 183 | 0 | 148 | |
| Sustaining capital | 107 | 69 | 17 | 72 | 76 | 59 | 26 | 61 | |
| Total AISC | 1,340 | 736 | 770 | 893 | 970 | 720 | 1,124 | 941 | |
* The group total includes a credit of US$5/oz of unallocated corporate related costs in H1 2017, and a cost of US$46/oz in H1 2016.
AISC is intended to provide additional information on the total sustaining cost for each ounce sold, taking into account expenditure incurred in addition to direct mining costs and selling costs.
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include all costs absorbed into inventory, as well as royalties, co-product credits, and production taxes, and exclude capitalised production stripping costs, inventory purchase accounting adjustments, unrealised gains/losses from non-hedge currency and commodity contracts, depreciation and amortisation and corporate social responsibility charges. Cash cost is calculated net of co-product revenue. Cash cost per tonne milled is calculated by dividing the aggregate of these costs by total tonnes milled.
EBITDA is a non-IFRS financial measure. Acacia calculates EBITDA as net profit or loss for the period excluding:
EBITDA is intended to provide additional information to investors and analysts. It does not have any standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA differently.
A reconciliation between net profit for the period and EBITDA is presented below:
| (US$000) | Three months ended 30 June | Six months ended 30 June | |||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | |
| Net profit/(loss) for the period | 35,716 | 46,282 | 62,543 | (6,128) | |
| Plus income tax expense/(credit) | 17,819 | 27,567 | 37,002 | 107,744 | |
| Plus depreciation and amortisation | 23,417 | 43,166 | 57,959 | 78,376 | |
| Plus finance expense | 3,216 | 2,514 | 5,454 | 5,380 | |
| Less finance income | (946) | (197) | (1,543) | (490) | |
| EBITDA | 79,222 | 119,332 | 161,415 | 184,882 | |
*Depreciation and amortisation includes the depreciation component of the cost of inventory sold.
Adjusted EBITDA is a non-IFRS financial measure. It is calculated by excluding one-off costs or credits relating to non-routine transactions from EBITDA. It excludes other credits and charges that, individually or in aggregate, if of a similar type, are of a nature or size that requires explanation in order to provide additional insight into the underlying business performance. EBITDA is adjusted for items (a) to (c) as contained in the reconciliation to adjusted net earnings below.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for depreciation and amortisation and goodwill impairment charges.
Adjusted net earnings is a non-IFRS financial measure. It is calculated by excluding certain costs or credits relating to non-routine transactions from net profit attributed to owners of the parent. It includes other credit and charges that, individually or in aggregate, if of a similar type, are of a nature or size that requires explanation in order to provide additional insight into the underlying business performance.
Adjusted net earnings and adjusted earnings per share have been calculated as follows:
| (US$000) | Three months ended 30 June | Six months ended 30 June | |||
| (Unaudited) | 2017 | 2016 | 2017 | 2016 | |
| Net earnings/(loss) | 35,716 | 46,282 | 62,543 | (6,128) | |
| Adjusted for: | |||||
| Restructuring cost (a) | 2,477 | 1,264 | 3,304 | 2,125 | |
| Discounting of indirect taxes (b) | - | (6,508) | - | (6,508) | |
| One-off legal settlements (c) | 1,500 | - | 1,500 | - | |
| Prior year tax positions recognised 1 | - | - | - | 69,916 | |
| Tax impact of the above | (1,193) | (379) | (1,441) | (638) | |
| Adjusted net earnings | 38,500 | 40,659 | 65,906 | 58,767 | |
1 For the Six months ended 30 June 2016, US$69.9 million represents a provision raised for the implied impact of an adverse tax ruling made by the Tanzanian Court of Appeal with respect to historical tax assessments of Bulyanhulu. As reported in Q1 2016, the impact of the ruling was calculated for Bulyanhulu and extrapolated to North Mara and Tulawaka as well and covers results up to the end of 2015. On a site basis, US$35.1 million was raised for Bulyanhulu, US$30.4 million for North Mara and US$4.4 million for Tulawaka.
Adjusted net earnings per share is a non-IFRS financial measure and is calculated by dividing adjusted net earnings by the weighted average number of Ordinary Shares in issue.
Free cash flow is a non-IFRS measure and represents the change in cash and cash equivalents in a given period.
Net cash is a non-IFRS measure. It is calculated by deducting total borrowings from cash and cash equivalents.
Mining statistical information
The following describes certain line items used in the Acacia Group’s discussion of key performance indicators:
Risk Review
We have made a number of further developments in the identification and management of our risk profile over the course of H1 2017. Where appropriate, risk ratings have been reviewed against risk management controls and other mitigating factors. Our principal risks continue to fall within four broad categories: strategic risks, financial risks, external risks and operational risks. Whilst the overall makeup of our principal risks has not significantly changed from that published in the 2016 Annual Report, there have been changes in certain risk profiles. Developments such as the ban on the export of gold/copper concentrate and the recent enacting of Tanzanian legislation relating to the legal and regulatory framework governing the natural resources sector have resulted in increases to the impact rating of certain risks.
As a result of our mid-year assessment, at this stage we believe it appropriate to include a new risk as a principal risk for the remainder of 2017 relating to cyber security. The likelihood of this risk has increased in the light of the increase in cybersecurity related incidents on a global level and the potential impact that a cyber security incident could have on the availability and integrity of our information technology infrastructure.
As a result of the risk review outlined above, we view our principal risks for the remainder of 2017 as relating to the following:
• Political, legal and regulatory developments
• Security, trespass and vandalism
• Single country risk
• Implementation of enhanced operational systems
• Safety risks relating to mining operations
• Equipment effectiveness
• Environmental hazards and rehabilitation
• Continuity of power supply
• Significant changes to commodity prices
• Cyber security
Further details as regards our Principal Risks and Uncertainties and risk assessments conducted in respect thereof will be provided as part of the 2017 Annual Report and Accounts.
Directors’ Responsibility Statement
The Directors confirm that, to the best of their knowledge, the condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union. The half-year management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
The Directors of Acacia Mining plc are listed in the Acacia Mining plc Annual Report for 31 December 2016, save for Mr Peter Tomsett and Ambassador Juma Mwapachu. A list of current Directors is maintained on the Acacia Mining plc Group website: www.acaciamining.com.
On behalf of the Board
| Brad Gordon, Chief Executive Officer | Kelvin Dushnisky, Chairman |
Independent review report to Acacia Mining plc
Report on the condensed consolidated interim financial information
Our conclusion
We have reviewed Acacia Mining plc's condensed consolidated interim financial information (the "interim financial statements") in the interim results of Acacia Mining plc for the 6 month period ended 30 June 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
Emphasis of Matter – Impact of mineral concentrate export ban and legislative changes in Tanzania
In forming our conclusion on the interim financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 2 to the Interim financial statements and additional commentary within the Interim announcement concerning the ongoing mineral concentrate export ban and legislative changes in Tanzania. With regards to a potential negotiated settlement of the matter, it is too early to reliably estimate how a resolution could impact the Group’s financial position, assets, liabilities and future cash flows. As a consequence, these conditions, along with the other matters explained in note 2 to the interim financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern. The interim financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.
What we have reviewed
The interim financial statements comprise:
The interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21 July 2017
Condensed Financial Information
Consolidated income statement
| For the six months ended 30 June | For the year ended 31 December | |||
| (Unaudited) | (Unaudited) | (Audited) | ||
| (US$’000) | Notes | 2017 | 2016 | 2016 |
| Revenue | 391,664 | 504,947 | 1,053,532 | |
| Cost of sales | (243,967) | (355,439) | (727,080) | |
| Gross profit | 147,697 | 149,508 | 326,452 | |
| Corporate administration | (12,520) | (9,771) | (21,895) | |
| Share-based payments | 7,785 | (19,635) | (29,929) | |
| Exploration and evaluation costs | (16,150) | (11,150) | (24,020) | |
| Corporate social responsibility expenses | (3,739) | (4,614) | (10,665) | |
| Other (charges)/income | 7 | (19,617) | 2,168 | 11,649 |
| Profit/ (loss) before net finance expense and taxation | 103,456 | 106,506 | 251,592 | |
| Finance income | 8 | 1,543 | 490 | 1,512 |
| Finance expense | 8 | (5,454) | (5,380) | (11,047) |
| Profit/ (loss) before taxation | 99,545 | 101,616 | 242,057 | |
| Tax expense | 9 | (37,002) | (107,744) | (147,113) |
| Net (loss)/ profit for the period | 62,543 | (6,128) | 94,944 | |
| (Loss)/ earnings per share (cents): | ||||
| Basic (loss)/ earnings per share (cents) | 10 | 15.3 | (1.5) | 23.2 |
| Diluted (loss)/ earnings per share (cents) | 10 | 15.2 | (1.5) | 23.1 |
The notes on pages 41 to 58 are an integral part of this financial information.
Consolidated statement of comprehensive income
| For the six months ended 30 June | For the year ended 31 December | |||
| (Unaudited) | (Unaudited) | (Audited) | ||
| (US$’000) | 2017 | 2016 | 2016 | |
| Net (loss)/ profit for the period | 62,543 | (6,128) | 94,944 | |
| Other comprehensive income: | ||||
| Items that may be subsequently reclassified to profit or loss: | ||||
| Changes in fair value of cash flow hedges | 52 | (1,226) | 7 | |
| Total comprehensive (loss)/ income for the period | 62,595 | (7,354) | 94,951 | |
The notes on pages 41 to 58 are an integral part of this financial information.
| Consolidated balance sheet | As at 30 June (Unaudited) |
As at 30 June (Unaudited) |
As at 31 December (Audited) |
|
| (US$’000) | Notes | 2017 | 2016 | 2016 |
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill and intangible assets | 216,190 | 211,190 | 216,190 | |
| Property, plant and equipment | 12 | 1,465,309 | 1,414,194 | 1,443,176 |
| Deferred tax assets | 3,208 | 11,416 | 8,431 | |
| Non-current portion of inventory | 14 | 115,775 | 87,050 | 98,936 |
| Derivative financial instruments | 13 | 770 | 129 | 821 |
| Other assets | 58,474 | 118,197 | 63,297 | |
| 1,859,726 | 1,842,176 | 1,830,851 | ||
| Current assets | ||||
| Inventories | 14 | 280,692 | 195,657 | 184,313 |
| Trade and other receivables | 12,039 | 20,119 | 18,830 | |
| Derivative financial instruments | 13 | 601 | 9 | 1,343 |
| Other current assets | 15 | 190,868 | 86,230 | 149,518 |
| Cash and cash equivalents | 175,886 | 284,357 | 317,791 | |
| 660,086 | 586,372 | 671,795 | ||
| Total assets | 2,519,812 | 2,428,548 | 2,502,646 | |
| EQUITY AND LIABILITIES | ||||
| Share capital and share premium | 929,199 | 929,199 | 929,199 | |
| Other reserves | 961,912 | 839,505 | 933,696 | |
| Total owners' equity | 1,891,111 | 1,768,704 | 1,862,895 | |
| Total equity | 1,891,111 | 1,768,704 | 1,862,895 | |
Non-current liabilities |
||||
| Borrowings | 16 | 56,800 | 85,200 | 71,000 |
| Deferred tax liabilities | 148,341 | 138,751 | 148,390 | |
| Derivative financial instruments | 13 | 1,068 | 588 | 30 |
| Provisions | 147,314 | 147,676 | 145,722 | |
| Other non-current liabilities | 4,778 | 10,063 | 15,699 | |
| 358,301 | 382,278 | 380,841 | ||
| Current liabilities | ||||
| Trade and other payables | 228,942 | 211,852 | 222,543 | |
| Borrowings | 16 | 28,400 | 28,400 | 28,400 |
| Derivative financial instruments | 13 | 1,114 | 10,973 | 584 |
| Provisions | 9,336 | 1,566 | 7,235 | |
| Other current liabilities | 2,608 | 24,775 | 148 | |
| 270,400 | 277,566 | 258,910 | ||
| Total liabilities | 628,701 | 659,844 | 639,751 | |
| Total equity and liabilities | 2,519,812 | 2,428,548 | 2,502,646 |
The notes on pages 41 to 58 are an integral part of this financial information.
Consolidated statement of changes in equity
| Notes | Share capital | Share premium | Other distributable reserve | Cash flow hedging reserve | |
| (US$’000) | |||||
| Balance at 31 December 2015 (Audited) | 62,097 | 867,102 | 1,368,713 | 552 | |
| Total comprehensive loss for the period | - | - | - | (1,226) | |
| Dividends to equity holders of the Company | - | - | - | - | |
| Share option grants | - | - | - | - | |
| Balance at 30 June 2016 (Unaudited) | 62,097 | 867,102 | 1,368,713 | (674) | |
| Total comprehensive income for the period | - | - | - | 1,233 | |
| Share option grants | - | - | - | - | |
| Dividends to equity holders of the Company | - | - | - | - | |
| Balance at 31 December 2016 (Audited) | 62,097 | 867,102 | 1,368,713 | 559 | |
| Total comprehensive loss for the period | - | - | - | 52 | |
| Dividends to equity holders of the Company | 11 | - | - | - | - |
| Share option grants | |||||
| Balance at 30 June 2017 (Unaudited) | 62,097 | 867,102 | 1,368,713 | 611 |
| Share option reserve | Accumulated losses | Total owners' equity | Total non- controlling interests | Total equity | |
| (US$’000) | |||||
| Balance at 31 December 2015 (Audited) | 3,876 | (514,841) | 1,787,499 | - | 1,787,499 |
| Total comprehensive loss for the period | - | (6,128) | (7,354) | - | (7,354) |
| Dividends to equity holders of the Company | - | (11,490) | (11,490) | - | (11,490) |
| Share option grants | 49 | - | 49 | - | 49 |
| Balance at 30 June 2016 (Unaudited) | 3,925 | (532,459) | 1,768,704 | - | 1,768,704 |
| Total comprehensive income for the period | - | 101,072 | 102,305 | - | 102,305 |
| Share option grants | 28 | - | 28 | - | 28 |
| Dividends to equity holders of the Company | - | (8,142) | (8,142) | - | (8,142) |
| Balance at 31 December 2016 (Audited) | 3,953 | (439,529) | 1,862,895 | - | 1,862,895 |
| Total comprehensive loss for the period | - | 62,543 | 62,595 | - | 62,595 |
| Dividends to equity holders of the Company | - | (34,385) | (34,385) | - | (34,385) |
| Share option grants | 6 | 6 | 6 | ||
| Balance at 30 June 2017 (Unaudited) | 3,959 | (411,371) | 1,891,111 | - | 1,891,111 |
The notes on pages 41 to 58 are an integral part of this financial information.
Consolidated statement of cash flows
| For the six months ended 30 June |
For the year ended 31 December |
|||
| (US$’000) | Notes | (Unaudited) 2017 |
(Unaudited) 2016 |
(Audited) 2016 |
| Cash flows from operating activities | ||||
| Net (loss)/ profit for the period | 62,543 | (6,128) | 94,944 | |
| Adjustments for: | ||||
| Tax expense | 37,002 | 107,744 | 147,113 | |
| Depreciation and amortisation | 69,722 | 79,367 | 156,301 | |
| Finance items | 3,911 | 4,890 | 9,535 | |
| Sale of mineral royalty | (1,753) | - | - | |
| Loss/ (profit) on disposal of property, plant and equipment | - | 136 | (289) | |
| Working capital adjustments | 17 | (159,697) | (16,306) | (58,497) |
| Other non-cash items | 17 | (8,209) | (8,952) | (23,850) |
| Cash generated from operations before interest and tax | 3,519 | 160,751 | 325,257 | |
| Finance income | 1,543 | 490 | 1,512 | |
| Finance expenses | (3,747) | (4,145) | (8,793) | |
| Net cash generated by operating activities | 1,315 | 157,096 | 317,976 | |
| Cash flows used in investing activities | ||||
| Purchase of property, plant and equipment | (100,064) | (82,606) | (193,643) | |
| Movement in other assets | 3,746 | 2,529 | 6,952 | |
| Proceeds from sale of mineral royalty | 1,753 | - | - | |
| Acquired mineral interest | - | - | (5,000) | |
| Other investing activities | (221) | (195) | 6,528 | |
| Net cash used in investing activities | (94,786) | (80,272) | (185,163) | |
| Cash flows used in financing activities | ||||
| Loans paid | (14,200) | (14,200) | (28,400) | |
| Dividends paid | (34,385) | (11,490) | (19,632) | |
| Net cash used in financing activities | (48,585) | (25,690) | (48,032) | |
| Net increase/ (decrease) in cash and cash equivalents | (142,056) | 51,134 | 84,781 | |
| Net foreign exchange difference | 151 | (45) | (258) | |
| Cash and cash equivalents at the beginning of the period | 317,791 | 233,268 | 233,268 | |
| Cash and cash equivalents at the end of the period | 175,886 | 284,357 | 317,791 | |
The notes on pages 41 to 58 are an integral part of this financial information.
Notes to the condensed financial information
1. General Information
Acacia Mining plc, formerly African Barrick Gold plc (the “Company”, "Acacia” or collectively with its subsidiaries the “Group”) was incorporated on 12 January 2010 and re-registered as a public limited company on 12 March 2010 under the Companies Act 2006. It is registered in England and Wales with registered number 7123187.
On 24 March 2010 the Company’s shares were admitted to the Official List of the United Kingdom Listing Authority (“UKLA”) and to trading on the Main Market of the London Stock Exchange, hereafter referred to as the Initial Public Offering (“IPO”). The address of its registered office is No.1 Cavendish Place, London, W1G 0QF.
Barrick Gold Corporation (“Barrick”) currently owns approximately 63.9% of the shares of the Company and is the ultimate parent and controlling party of the Group. The financial statements of Barrick can be obtained from www.barrick.com.
The condensed consolidated interim financial information for the six months ended 30 June 2017 was approved for issue by the Board of Directors of the Company on 21 July 2017. Statutory accounts for the year ended 31 December 2016 were approved by the Board of Directors on 7 March 2017 and delivered to the Registrar of Companies. The report of the auditors’ on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The condensed consolidated interim financial information has been reviewed, not audited. The condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2008.
The Group’s primary business is the mining, processing and sale of gold. The Group has three operating mines located in Tanzania. The Group also has a portfolio of exploration projects located across Africa.
2. Basis of Preparation of the condensed interim financial information
The condensed consolidated interim financial information for the six months ended 30 June 2017 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, ‘Interim Financial Reporting’ as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRS as adopted by the European Union. The condensed consolidated interim financial information has been prepared under the historical cost basis, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The financial information is presented in US dollars (US$) and all monetary results are rounded to the nearest thousand (US$’000) except when otherwise indicated.
Acacia Group’s business activities, together with factors likely to affect its future development, performance and position, are set out in the operational and financial review sections of this interim results release. The financial position of the Acacia Group, its cash flows, liquidity position and borrowing facilities are described in the operating and financial review sections of this interim results release.
At 30 June 2017, the Group had cash and cash equivalents of US$176 million with a further US$150 million available under the undrawn revolving credit facility which remains in place until November 2019. Total borrowings at the end of the period amounted to US$85 million, of which US$28 million will be paid in the next 12 months. Included in other current assets are amounts due to the Group relating to indirect taxes of US$165 million which are expected to be received or recovered within 12 months. The refunds remain dependent on processing and payments of refunds by the Government of Tanzania. Furthermore, included in working capital is finished gold contained in concentrate of approximately 127,000 ounces, approximately 8.3 million pounds of copper contained in concentrate and approximately 107,000 ounces of silver contained in concentrate. These contained metals are in a condition to be sold, and will deliver revenue, net of government royalties, of approximately US$163 million.
As set out in the other developments section on pages 2 to 5 and further explained in the operating and financial review sections, the current operating environment in Tanzania is challenging and there are several uncertainties in our operating environment. In March 2017, the Government of Tanzania issued a ban on the export of all gold/ copper concentrate and this ban remains in place. This has resulted in the stockpiled concentrate material referred to above. Currently, it is not clear how long this ban will remain in place. In addition, and as set out in the same paragraphs in the other developments section on pages 2 to 5 the Government of Tanzania has also announced some significant changes to the laws impacting the extractive industry in late June 2017, which have subsequently been passed in early July 2017.
The Directors are of the opinion that these developments and current circumstances represent ongoing challenges in terms of cash flow generation and continued uninterrupted operation of the Bulyanhulu and Buzwagi mines. Our third mine, North Mara, continues to perform well and to generate free cash flow.
As explained in the other developments section, the Group has served notices of Arbitration relating to its Bulyanhulu and Buzwagi mines under their respective Mineral Development Agreements. In addition, we also believe that our Mineral Development Agreements protect us from the legislative changes proposed. Notwithstanding these developments, we continue to believe that a negotiated settlement of these differences with the Tanzanian Government remains in the best interests of all parties and we look forward to discussions commencing in the near future. As negotiations are yet to commence the impact of a settlement on the Group’s financial position, assets, liabilities and future cash flows is uncertain. At the same time, management has instituted measures to limit unnecessary expenditure and preserve cash, and are considering a range of options to limit the impact of the above factors; amongst others to consider halting operations at the affected mines should it be needed.
In assessing the Acacia Group’s going concern status the Directors have taken into account the impact of the ban on ongoing operations as well as the following factors and assumptions; the significant current cash position, the latest mine plans and a range of scenarios around the various options under these circumstances, including the impact of an extended concentrate export ban or the impact of halting the affected mines for a period of time, the current gold and copper prices and market expectations for the same in the medium term, and Acacia Group’s capital expenditure and financing plans. In addition the Directors have assumed that the Group will repay its borrowing obligations in accordance with the current terms of its agreement, and that undrawn facilities continue to be available. After making appropriate enquiries and considering the uncertainties described above, the Directors consider that it is appropriate to adopt the going concern basis in preparing the condensed consolidated interim financial information however have concluded that the combination of these circumstances represents a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern should the assumptions referred to above prove not to be correct.
3. Accounting Policies
The accounting policies adopted are consistent with those used in the Acacia Mining plc annual financial statements for the year ended 31 December 2016. There are no new standards, interpretations or amendments to standards issued and effective for the period which materially impacted on the Group. The following exchange rates to the US dollar have been applied:
| As at 30 June 2016 |
Average six months ended 30 June 2016 |
As at 30 June 2016 |
Average six months ended 30 June 2016 |
As at 31 December 2016 |
Average year ended 31 December 2016 |
|
| South African rand (US$:ZAR) | 13.09 | 13.20 | 14.78 | 15.40 | 13.70 | 14.66 |
| Tanzanian shilling (US$:TZS) | 2,230 | 2,224 | 2,179 | 2,179 | 2,173 | 2,177 |
| Australian dollars (US$:AUD) | 1.30 | 1.33 | 1.35 | 1.36 | 1.38 | 1.34 |
| UK pound (US$:GBP) | 0.59 | 0.79 | 0.76 | 0.70 | 0.81 | 0.74 |
4. Estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016.
5. Segment Reporting
The Group has only one primary product produced in a single geographic location, being gold produced in Tanzania. In addition the Group produces copper and silver as a co-product. Reportable operating segments are based on the internal reports provided to the Chief Operating Decision Maker (“CODM”) to evaluate segment performance, decide how to allocate resources and make other operating decisions. After applying the aggregation criteria and quantitative thresholds contained in IFRS 8, the Group’s reportable operating segments were determined to be: North Mara gold mine; Bulyanhulu gold mine; Buzwagi gold mine; a separate Corporate and Exploration segment, which primarily consists of costs related to other charges and corporate social responsibility expenses.
Segment results and carrying values include items directly attributable to the segment as well as those that can be allocated on a reasonable basis. Segment carrying values are disclosed and calculated as shareholders equity after adding back debt and intercompany liabilities, and subtracting cash and intercompany assets. Capital expenditures comprise of additions to property, plant and equipment. The Group has also included segment cash costs and all-in sustaining cost per ounce sold.
Segment information for the reportable operating segments of the Group for the periods ended 30 June 2017, 30 June 2016 and 31 December 2016 is set out below.
| For the six months ended 30 June 2017 | ||||||
| (Unaudited) (US$’000,except per ounce amounts) |
North Mara | Bulyanhulu | Buzwagi | Other | Total | |
| Gold revenue | 220,217 | 100,023 | 65,619 | - | 385,859 | |
| Co-product revenue | 653 | 2,760 | 2,392 | - | 5,805 | |
| Total segment revenue | 220,870 | 102,783 | 68,011 | - | 391,664 | |
| Segment cash operating cost1 | (79,251) | (67,344) | (39,413) | 0 | (186,008) | |
| Corporate administration and exploration | (4,181) | (2,937) | (2,559) | (18,992) | (28,669) | |
| Other charges and corporate social responsibility expenses | (3,843) | (902) | (6,099) | (4,728) | (15,572) | |
| EBITDA2 | 133,595 | 31,600 | 19,940 | (23,720) | 161,415 | |
| Depreciation and amortisation4 | (29,009) | (26,940) | (1,777) | (233) | (57,959) | |
| EBIT2 | 104,586 | 4,660 | 18,163 | (23,953) | 103,456 | |
| Finance income | 1,543 | |||||
| Finance expense | (5,454) | |||||
| Profit before taxation | 99,545 | |||||
| Tax expense | (37,002) | |||||
| Net profit for the period | 62,543 | |||||
| Capital expenditure: | ||||||
| Sustaining | 10,930 | 8,599 | 865 | 957 | 21,351 | |
| Expansionary | 4,489 | 982 | - | 51 | 5,522 | |
| Capitalised development | 33,282 | 31,054 | - | - | 64,336 | |
| 48,701 | 40,635 | 865 | 1,008 | 91,209 | ||
| Non-cash capital expenditure adjustments | ||||||
| Reclamation asset adjustment | (56) | 191 | (1) | - | 134 | |
| Other non-cash capital expenditure | - | - | - | (1) | (1) | |
| Total capital expenditure | 48,645 | 40,826 | 864 | 1,007 | 91,342 | |
| Segmental cash operating cost | 79,251 | 67,344 | 39,413 | - | 186,008 | |
| Deduct: co-product revenue | (654) | (2,760) | (2,392) | - | (5,806) | |
| Total cash costs | 78,597 | 64,584 | 37,021 | - | 180,202 | |
| Sold ounces | 178,130 | 81,214 | 53,094 | - | 312,438 | |
| Cash cost per ounce sold2 | 441 | 795 | 697 | 577 | ||
| Corporate administration charges | 23 | 36 | 48 | 9 | 40 | |
| Share-based payments | (2) | (4) | (6) | (22) | (25) | |
| Rehabilitation - accretion and depreciation | 10 | 16 | 7 | - | 11 | |
| Corporate social responsibility expenses | 8 | 8 | 7 | 4 | 12 | |
| Capitalised stripping/ UG development | 187 | 382 | - | - | 206 | |
| Sustaining capital expenditure | 69 | 107 | 17 | 3 | 72 | |
| All-in sustaining cost per ounce sold2 | 736 | 1,340 | 770 | (6) | 893 | |
| Segment carrying value3 | 294,744 | 1,281,208 | 142,280 | 97,233 | 1,815,465 | |
| For the six months ended 30 June 2016 | ||||||
| (Unaudited) (US$’000,except per ounce amounts) |
North Mara | Bulyanhulu | Buzwagi | Other | Total | |
| Gold revenue | 203,788 | 182,872 | 97,954 | - | 484,614 | |
| Co-product revenue | 366 | 8,188 | 11,779 | - | 20,333 | |
| Total segment revenue | 204,154 | 191,060 | 109,733 | - | 504,947 | |
| Segment cash operating cost1 | (72,895) | (107,842) | (96,326) | - | (277,063) | |
| Corporate administration and exploration | (5,443) | (6,273) | (2,847) | (25,993) | (40,556) | |
| Other charges and corporate social responsibility expenses | 3,158 | (2,651) | (1,725) | (1,228) | (2,446) | |
| EBITDA2 | 128,974 | 74,294 | 8,835 | (27,221) | 184,882 | |
| Depreciation and amortisation4 | (29,346) | (41,107) | (6,869) | (1,054) | (78,376) | |
| EBIT2 | 99,628 | 33,187 | 1,966 | (28,275) | 106,506 | |
| Finance income | 490 | |||||
| Finance expense | (5,380) | |||||
| Profit before taxation | 101,616 | |||||
| Tax expense | (107,744) | |||||
| Net loss for the period | (6,128) | |||||
| Capital expenditure: | ||||||
| Sustaining | 7,257 | 11,506 | 2,231 | 654 | 21,648 | |
| Expansionary | 458 | 753 | - | - | 1,211 | |
| Capitalised development | 31,051 | 28,438 | - | - | 59,489 | |
| 38,766 | 40,697 | 2,231 | 654 | 82,348 | ||
| Non-cash capital expenditure adjustments | ||||||
| Reclamation asset adjustment | 6,252 | 9,937 | 3,007 | - | 19,196 | |
| Total capital expenditure | 45,018 | 50,634 | 5,238 | 654 | 101,544 | |
| Segmental cash operating cost | 72,895 | 107,842 | 96,326 | 277,063 | ||
| Deduct: co-product revenue | (366) | (8,188) | (11,779) | (20,333) | ||
| Total cash costs | 72,529 | 99,654 | 84,547 | 256,730 | ||
| Sold ounces | 169,840 | 150,719 | 80,404 | 400,963 | ||
| Cash cost per ounce sold2 | 427 | 661 | 1,052 | 640 | ||
| Corporate administration charges | 24 | 21 | 25 | 24 | ||
| Share-based payments | 7 | 11 | 11 | 49 | ||
| Rehabilitation - accretion and depreciation | 9 | 7 | 3 | 7 | ||
| Corporate social responsibility expenses | 11 | 5 | 7 | 12 | ||
| Capitalised stripping/ UG development | 183 | 189 | - | 148 | ||
| Sustaining capital expenditure | 59 | 76 | 26 | 61 | ||
| All-in sustaining cost per ounce sold2 | 720 | 970 | 1,124 | 941 | ||
| Segment carrying value3 | 262,260 | 1,214,729 | 71,676 | 62,764 | 1,611,429 | |
| For the year ended 31 December 2016 | ||||||
| (Audited) (US$’000,except per ounce amounts) |
North Mara | Bulyanhulu | Buzwagi | Other | Total | |
| Gold revenue | 468,340 | 345,481 | 200,648 | - | 1,014,469 | |
| Co-product revenue | 953 | 15,447 | 22,663 | - | 39,063 | |
| Total segment revenue | 469,293 | 360,928 | 223,311 | - | 1,053,532 | |
| Segment cash operating cost1 | (155,344) | (217,226) | (188,896) | - | (561,466) | |
| Corporate administration and exploration | (8,251) | (9,507) | (4,176) | (23,191) | (45,915) | |
| Other charges and corporate social responsibility expenses | (2,918) | (3,960) | (3,011) | (20,874) | (30,763) | |
| EBITDA2 | 302,780 | 130,235 | 27,228 | (44,855) | 415,388 | |
| Impairment charges | - | - | - | - | - | |
| Depreciation and amortisation4 | (67,472) | (82,022) | (12,668) | (1,634) | (163,796) | |
| EBIT2 | 235,308 | 48,213 | 14,560 | (46,489) | 251,592 | |
| Finance income | 1,512 | |||||
| Finance expense | (11,047) | |||||
| Loss before taxation | 242,057 | |||||
| Tax expense | (147,113) | |||||
| Net profit for the year | 94,944 | |||||
| Capital expenditure: | ||||||
| Sustaining | 23,558 | 20,231 | 3,582 | 1,416 | 48,787 | |
| Expansionary | 2,399 | 1,262 | - | - | 3,661 | |
| Capitalised development | 75,609 | 63,082 | - | - | 138,691 | |
| 101,566 | 84,575 | 3,582 | 1,416 | 191,139 | ||
| Non-cash capital expenditure adjustments | ||||||
| Reclamation asset adjustment | 6,703 | 10,728 | 4,524 | - | 21,955 | |
| Total capital expenditure | 108,269 | 95,303 | 8,106 | 1,416 | 213,094 | |
| Segmental cash operating cost | 155,344 | 217,226 | 188,896 | 561,466 | ||
| Deduct: co-product revenue | (953) | (15,447) | (22,663) | (39,063) | ||
| Total cash costs | 154,391 | 201,779 | 166,233 | 522,403 | ||
| Sold ounces | 376,255 | 279,286 | 161,202 | 816,743 | ||
| Cash cost per ounce sold2 | 410 | 722 | 1,031 | 640 | ||
| Corporate administration charges | 21 | 21 | 26 | 27 | ||
| Share-based payments | 2 | 2 | 3 | 37 | ||
| Rehabilitation - accretion and depreciation | 9 | 7 | 3 | 7 | ||
| Corporate social responsibility expenses | 15 | 6 | 10 | 13 | ||
| Capitalised stripping/ UG development | 201 | 226 | - | 170 | ||
| Sustaining capital expenditure | 75 | 74 | 22 | 64 | ||
| All-in sustaining cost per ounce sold2 | 733 | 1,058 | 1,095 | 958 | ||
| Segment carrying value3 | 246,175 | 1,231,793 | 97,243 | 82,710 | 1,657,921 | |
1 The CODM reviews cash operating costs for the three operating mine sites separately from corporate administration costs and exploration costs. Consequently, the Group has reported these costs in this manner.
2 These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ‘Non IFRS measures’ on page 28 for definitions.
3 Segment carrying values are calculated as shareholders equity after adding back debt and intercompany liabilities, and subtracting cash and intercompany assets and include outside shareholders’ interests.
4 Depreciation and amortisation includes the depreciation component of the cost of inventory sold.
6. Impairment Assessment
In accordance with IAS 36 “Impairment of assets” and IAS 38 “Intangible Assets” a review for impairment of goodwill is undertaken annually, or at any time an indicator of impairment is considered to exist, and in accordance with IAS 16 “Property, plant and equipment” a review for impairment of long-lived assets is undertaken at any time an indicator of impairment is considered to exist.
As previously reported, and as discussed in the other developments and operating and finance reviews of this interim financial results release, the Government of Tanzania announced a ban on the export of gold/copper concentrate in March 2017. Subsequently, during the second quarter two Presidential Committees reported their findings following investigations into the technical and economic aspects of the historic exports of gold/copper concentrates. Acacia fully refutes the implausible findings of both committees which claim that Acacia and its predecessor companies have historically significantly under-declared the contents of exports of concentrate which has led to an under-declaration of taxes running into the tens of billions of dollars. Acacia re-iterates that it has declared everything of commercial value that it has produced since it started operating in Tanzania and has paid all appropriate royalties and taxes on all of the payable minerals that it has produced. Discussions to find a mutually beneficial solution to these issues are expected to start early in Q3 2017.
The above has had a negative impact on the operating environment of Acacia and the three mines it operates in Tanzania. These changes, in combination with the ban imposed and proposed legislative changes have been identified by management as potential triggers for an impairment assessment.
As a result of the above, a review for impairment of the affected cash generating units (“CGU”) has been performed. The review compared the recoverable amount of assets for the CGU to the carrying value of the CGU’s including goodwill. The recoverable amount of an asset is assessed by reference to the higher of value in use (“VIU”), being the net present value (“NPV”) of future cash flows expected to be generated by the asset, and fair value less costs to dispose (“FVLCD”). The FVLCD of a CGU is based on an estimate of the amount that the Group may obtain in a sale transaction on an arm’s length basis. There is no active market for the Group’s CGU’s. Consequently, FVLCD is derived using discounted cash flow techniques (NPV of expected future cash flows of a CGU), which incorporate market participant assumptions. Cost to dispose is based on management’s best estimates of future selling costs at the time of calculating FVLCD. Costs attributable to the disposal of a CGU are not considered significant. The expected future cash flows utilised in the NPV model are derived from estimates of projected future revenues, future cash costs of production and capital expenditures contained in the life-of-mine (“LOM”) plan for each CGU. The Group’s LOM plans reflect proven and probable reserves, assume limited resource conversion, and are based on detailed research, analysis and modelling to optimise the internal rate of return for each CGU.
The discount rate applied to calculate the present value is based upon the real weighted average cost of capital applicable to the CGU. The discount rate reflects equity risk premiums over the risk-free rate, the impact of the remaining economic life of the CGU and the risks associated with the relevant cash flows based on the country in which the CGU is located. These risk adjustments are based on observed equity risk premiums, historical country risk premiums and average credit default swap spreads for the period.
The key economic assumptions used in the reviews during 2017 and 2016 were:
| For the 6 months ended 30 June |
For the year ended 31 December |
|
| 2017 | 2016 | |
| Gold price per ounce (2017) | US$1,200 | US$1,200 |
| Gold price per ounce(Long term) | US$1,200 | US$1,200 |
| Copper price per pound | US$2.50 | US$2.25 |
| South African Rand (US$:ZAR) | 14 | 14 |
| Tanzanian Shilling (US$:TZS) | 2,100 | 2,150 |
| Long-term oil price per barrel | US$60 | US$60 |
| Discount rate | 5% | 5% |
| NPV multiples | 1 | 1 |
Our assessment took into account the impact of the current ban on the export of gold/ copper concentrate as well as the increased royalty rate and export clearing fees announced in June 2017 on cash flows generated by each affected CGU.
As a result of the impairment assessment performed, no impairment charge was recorded for the six months ended 30 June 2017.
For purposes of testing for impairment of long-lived assets, we have assessed whether a reasonably possible change in any of the key assumptions used to estimate the recoverable value for CGUs would result in an impairment charge.
Management’s view is that the recoverable values are most sensitive to changes in the assumptions around gold prices and discount rates. As a result, sensitivity calculations were performed for these for each of the CGUs. The sensitivity analysis is based on a decrease in the long term gold price of US$100 per ounce, and an increase in the discount rate of 1%.
Neither of the reasonably possible changes set out above would result in an impairment. This sensitivity analysis also does not take into account any of management’s mitigation factors should these changes occur.
Our review assumed that negotiations around resolving the current in-country matters are resolved. Should this not be the case, a carrying value assessment review will be performed again, and this might or might not result in the recognition of impairment losses.
7. Other Charges
| For the six months ended 30 June | For the year ended 31 December |
||
| (Unaudited) | (Unaudited) | (Audited) | |
| (US$’000) | 2017 | 2016 | 2016 |
| Other expenses | |||
| Operational Review costs (including restructuring cost) | 3,304 | 2,125 | 7,689 |
| Foreign exchange losses | 4,583 | - | - |
| Disallowed indirect taxes | 615 | 938 | 1,447 |
| Unrealised non-hedge derivative losses | 2,431 | - | - |
| Legal costs | 4,601 | 667 | 2,641 |
| One off legal settlements | 1,500 | - | - |
| Government levies and charges | 535 | - | - |
| Loss on disposal of property, plant and equipment | - | 136 | - |
| Other | 3,801 | 2,782 | 4,259 |
| Total | 21,370 | 6,648 | 16,036 |
| Other income | |||
| Discounting of indirect tax receivables | - | (6,508) | (9,719) |
| Profit on disposal of property, plant and equipment | - | - | (289) |
| Unrealised non-hedge derivative gains | - | (1,352) | (13,031) |
| Insurance proceeds | - | - | (3,455) |
| Foreign exchange gains | - | (956) | (1,137) |
| Sale of mineral royalty | (1,753) | - | - |
| Other | - | - | (54) |
| Total | (1,753) | (8,816) | (27,685) |
| Total other income/(charges) | 19,617 | (2,168) | (11,649) |
8. Finance Income and Expenses
a)Finance income
| For the six months ended 30 June | For the year ended 31 December |
||
| (Unaudited) | (Unaudited) | (Audited) | |
| (US$’000) | 2017 | 2016 | 2016 |
| Interest on time deposits | 1,443 | 403 | 1,236 |
| Other | 100 | 87 | 276 |
| Total | 1,543 | 490 | 1,512 |
b) Finance expense
| For the six months ended 30 June | For the year ended 31 December |
||
| (Unaudited) | (Unaudited) | (Audited) | |
| (US$’000) | 2017 | 2016 | 2016 |
| Unwinding of discount1 | 1,708 | 1,235 | 2,254 |
| Revolving credit facility charges2 | 1,151 | 1,087 | 2,279 |
| Interest on CIL facility | 1,573 | 1,896 | 3,956 |
| Interest on finance leases | 200 | 199 | - |
| Bank charges | 319 | 604 | 701 |
| Other | 503 | 359 | 1,857 |
| Total | 5,454 | 5,380 | 11,047 |
9. Tax Expense
| For the six months ended 30 June | For the year ended 31 December |
||
| (Unaudited) | (Unaudited) | (Audited) | |
| (US$’000) | 2017 | 2016 | 2016 |
| Current tax: | |||
| Current tax on profits for the period | 31,793 | 27,843 | 54,508 |
| Adjustments in respect of prior years1 | 0 | 36,6041 | 36,697 |
| Total current tax | 31,793 | 64,447 | 91,205 |
| Deferred tax: | |||
| Origination and reversal of temporary differences2 | 5,209 | 43,2972 | 55,908 |
| Total deferred tax | 5,209 | 43,297 | 55,908 |
| Income tax expense | 37,002 | 107,744 | 147,113 |
1 Included in this amount for 2016 is a provision for uncertain tax positions of US$32.3 million relating to North Mara, and US$4.4 million relating to Tulawaka, following an adverse tax ruling as reported in Q1 2016.
2 Included in this amount for 2016 is a provision for uncertain tax positions of US$35.0 million relating to Bulyanhulu following an adverse tax ruling, as reported in Q1 2016.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities as follows:
| For the six months ended 30 June | For the year ended 31 December | ||
| (Unaudited) | (Unaudited) | (Audited) | |
| (US$’000) | 2017 | 2016 | 2016 |
| Profit/(loss) before tax | 99,545 | 101,616 | 242,057 |
| Tax calculated at domestic tax rates applicable to profits in the respective countries | 30,519 | 28,481 | 73,373 |
| Tax effects of: | |||
| Expenses not deductible for tax purposes | 57 | 463 | 247 |
| Tax losses for which no deferred income tax asset was recognised3 | 6,426 | 7,100 | 76,592 |
| Adjustments to unrecognised tax benefits carried forward4 | - | 69,916 | - |
| Prior year adjustments | - | 1,784 | (3,099) |
| Tax charge | 37,002 | 107,744 | 147,113 |
3 The reconciliation includes an amount of US$69.9 million for 2016 relating to an increase in the amount of unrecognised tax liabilities carried forward. The adjustment reflects uncertainty regarding recoverability of certain tax losses, and gives rise to an increased deferred tax charge.
Tax periods remain open to review by the Tanzanian Revenue Authority (TRA) in respect of income taxes for five years following the date of the filing of the corporate tax return, during which time the authorities have the right to raise additional tax assessments including penalties and interest. Under certain circumstances the reviews may cover longer periods. Because a number of tax periods remain open to review by tax authorities, there is a risk that transactions that have not been challenged in the past by the authorities may be challenged by them in the future, and this may result in the raising of additional tax assessments plus penalties and interest.
10. (Loss)/ earnings Per Share (EPS)
Basic EPS is calculated by dividing the net (loss)/ profit for the period attributable to owners of the Company by the weighted average number of Ordinary Shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume conversion of all dilutive potential Ordinary Shares. The Company has dilutive potential Ordinary Shares in the form of stock options. The weighted average number of shares is adjusted for the number of shares granted assuming the exercise of stock options.
At 30 June 2017, 30 June 2016 and 31 December 2016, (loss)/ earnings per share have been calculated as follows:
| For the six months ended 30 June |
For the year ended 31 December |
||||||
| (Unaudited) | (Unaudited) | (Audited) | |||||
| (US$’000) | 2017 | 2016 | 2016 | ||||
| (Loss)/ earnings | |||||||
| Net (loss)/ profit attributable to owners of the parent | 62,543 | (6,128) | 94,944 | ||||
| Weighted average number of Ordinary Shares in issue | 410,085,499 | 410,085,499 | 410,085,499 | ||||
| Adjusted for dilutive effect of stock options | 382,474 | 277,889 | 355,514 | ||||
| Weighted average number of Ordinary Shares for diluted earnings per share | 410,467,973 | 410,363,388 | 410,441,013 | ||||
| (Loss)/ earnings per share | |||||||
| Basic (loss)/ earnings per share (cents) | 15.3 | (1.5) | 23.2 | ||||
| Dilutive (loss)/ earnings per share (cents) | 15.2 | (1.5) | 23.1 | ||||
11. Dividends
The final dividend declared in respect of the year ended 31 December 2016 of US$34.4 million (US0.8 cents per share) was paid during May 2017. No 2017 interim dividend has been declared based on the Group’s year-to-date negative free cash flow.
12. Property, Plant and Equipment
| For the six months ended 30 June 2017 (Unaudited) (US$’000) |
Plant and equipment | Mineral properties and mine development costs | Assets under construction¹ | Total |
| At 1 January 2017, net of accumulated depreciation and impairment | 553,993 | 842,019 | 47,164 | 1,443,176 |
| Additions | - | - | 91,209 | 91,209 |
| Non-cash reclamation asset adjustments | - | - | 134 | 134 |
| Foreign currency translation adjustments | 512 | - | - | 512 |
| Disposals/write-downs | - | - | - | - |
| Depreciation | (37,854) | (31,868) | - | (69,722) |
| Transfers between categories | 21,373 | 74,511 | (95,884) | - |
| At 30 June 2017 | 538,024 | 884,662 | 42,623 | 1,465,309 |
| At 1 January 2017 | ||||
| Cost | 1,914,522 | 1,777,277 | 47,164 | 3,738,963 |
| Accumulated depreciation and impairment | (1,360,529) | (935,258) | - | (2,295,787) |
| Net carrying amount | 553,993 | 842,019 | 47,164 | 1,443,176 |
| At 30 June 2017 | ||||
| Cost | 1,936,407 | 1,851,788 | 42,623 | 3,830,818 |
| Accumulated depreciation and impairment | (1,398,383) | (967,126) | - | (2,365,509) |
| Net carrying amount | 538,024 | 884,662 | 42,623 | 1,465,309 |
| For the six months ended 30 June 2016 (Unaudited) (US$’000) |
Plant and equipment | Mineral properties and mine development costs | Assets under construction¹ | Total |
| At 1 January 2016, net of accumulated depreciation and impairment | 572,877 | 761,592 | 56,244 | 1,390,713 |
| Additions | - | - | 82,348 | 82,348 |
| Non-cash reclamation asset adjustments | - | - | 19,196 | 19,196 |
| Foreign currency translation adjustments | 1,441 | - | - | 1,441 |
| Disposals/write-downs | (137) | - | - | (137) |
| Depreciation | (49,362) | (30,005) | - | (79,367) |
| Transfers between categories | 41,169 | 60,801 | (101,970) | - |
| At 30 June 2016 | 565,988 | 792,388 | 55,818 | 1,414,194 |
| At 1 January 2016 | ||||
| Cost | 1,845,234 | 1,636,413 | 56,244 | 3,537,891 |
| Accumulated depreciation and impairment | (1,272,357) | (874,821) | - | (2,147,178) |
| Net carrying amount | 572,877 | 761,592 | 56,244 | 1,390,713 |
| At 30 June 2016 | ||||
| Cost | 1,887,676 | 1,697,214 | 55,818 | 3,640,708 |
| Accumulated depreciation and impairment | (1,321,688) | (904,826) | - | (2,226,514) |
| Net carrying amount | 565,988 | 792,388 | 55,818 | 1,414,194 |
| For the year ended 31 December 2016 (Audited) (US$’000) |
Plant and equipment | Mineral properties and mine development costs | Assets under construction¹ | Total |
| At 1 January 2016, net of accumulated depreciation and impairment | 572,877 | 761,592 | 56,244 | 1,390,713 |
| Additions | - | - | 191,139 | 191,139 |
| Non-cash reclamation asset adjustments | - | - | 21,955 | 21,955 |
| Foreign currency translation adjustments | 2,203 | - | - | 2,203 |
| Disposals/write-downs | (6,533) | - | - | (6,533) |
| Depreciation | (95,864) | (60,437) | - | (156,301) |
| Transfers between categories | 81,310 | 140,864 | (222,174) | - |
| At 31 December 2016 | 553,993 | 842,019 | 47,164 | 1,443,176 |
| At 1 January 2016 | ||||
| Cost | 1,845,234 | 1,636,413 | 56,244 | 3,537,891 |
| Accumulated depreciation and impairment | (1,272,357) | (874,821) | - | (2,147,178) |
| Net carrying amount | 572,877 | 761,592 | 56,244 | 1,390,713 |
| At 31 December 2016 | ||||
| Cost | 1,914,522 | 1,777,277 | 47,164 | 3,738,963 |
| Accumulated depreciation and impairment | (1,360,529) | (935,258) | - | (2,295,787) |
| Net carrying amount | 553,993 | 842,019 | 47,164 | 1,443,176 |
1 Assets under construction represents (a) sustaining capital expenditures incurred constructing property, plant and equipment related to operating mines and advance deposits made towards the purchase of property, plant and equipment; and (b) expansionary expenditure allocated to a project on a business combination or asset acquisition, and the subsequent costs incurred to develop the mine. Once these assets are ready for their intended use, the balance is transferred to plant and equipment and/or mineral properties and mine development costs.
Leases
Property, plant and equipment includes assets relating to the design and construction costs of power transmission lines and related infrastructure. At completion, ownership was transferred to TANESCO in exchange for amortised repayment in the form of reduced electricity supply charges. No future lease payment obligations are payable under these finance leases.
Property, plant and equipment also includes five drill rigs purchased under short-term finance leases.
The following amounts were included in property, plant and equipment where the Group is a lessee under a finance lease:
| For the six months ended 30 June |
For the year ended 31 December |
|||
| (Unaudited) | (Unaudited) | (Audited) | ||
| (US$’000) | 2017 | 2016 | 2016 | |
| Cost - capitalised finance leases | 51,618 | 51,617 | 51,617 | |
| Accumulated depreciation and impairment | (42,050) | (36,392) | (40,925) | |
| Net carrying amount | 9,568 | 15,225 | 10,692 | |
13. Derivative Financial Instruments
The table below analyses financial instruments carried at fair value, by valuation method. The Group has derivative financial instruments in the form of economic and cash flow hedging contracts which are all defined as level two instruments as they are valued using inputs other than quoted prices that are observable for the assets or liabilities. The following tables present the group’s assets and liabilities that are measured at fair value at 30 June 2017, 30 June 2016 and 31 December 2016.
| Assets | Liabilities | |||||
(US$’000) |
Current | Non-current | Current | Non-current | ||
| For the six months ended 30 June 2017 (Unaudited) | ||||||
| Interest contracts: Designated as cash flow hedges | 528 | 611 | 518 | - | ||
| Commodity contracts - Fuel: Not designated as hedges | 73 | 159 | 596 | 1,068 | ||
| Total | 601 | 770 | 1,114 | 1,068 | ||
| Assets | Liabilities | |||||
(US$’000) |
Current | Non-current | Current | Non-current | ||
| For the six months ended 30 June 2016 (Unaudited) | ||||||
| Interest contracts: Designated as cash flow hedges | - | - | 434 | 320 | ||
| Currency contracts: Not designated as hedges | - | - | 6,761 | - | ||
| Commodity contracts - Fuel: Not designated as hedges | 9 | 129 | 3,778 | 268 | ||
| Total | 9 | 129 | 10,973 | 588 | ||
| Assets | Liabilities | ||||||
(US$’000) |
Current | Non-current | Current | Non-current | |||
| For the year ended 31 December 2016 (Audited) | |||||||
| Interest contracts: Designated as cash flow hedges | 33 | 255 | 73 | - | 215 | ||
| Commodity contracts - Fuel: Not designated as hedges | 1,310 | 566 | 511 | 30 | 1,335 | ||
| Total | 1,343 | 821 | 584 | 30 | 1,550 | ||
14. Inventories
| For the six months ended 30 June |
For the year ended 31 December |
|||
| (Unaudited) | (Unaudited) | (Audited) | ||
| (US$’000) | 2017 | 2016 | 2016 | |
| Raw materials | ||||
| Ore in stockpiles | 14,041 | 17,733 | 8,270 | |
| Mine operating supplies | 154,859 | 145,936 | 143,609 | |
| Work in process | 10,807 | 14,632 | 10,534 | |
| Finished products | ||||
| Gold doré/bullion | 7,084 | 5,424 | 8,692 | |
| Gold, copper and silver concentrate | 93,901 | 11,932 | 13,208 | |
| Total current portion of inventory | 280,692 | 195,657 | 184,313 | |
| Non-current ore in stockpiles¹ | 115,775 | 87,050 | 98,936 | |
| Total | 396,467 | 282,707 | 283,249 | |
15. Other Current Assets
| For the six months ended 30 June |
For the year ended 31 December |
|||
| (Unaudited) | (Unaudited) | (Audited) | ||
| (US$’000) | 2017 | 2016 | 2016 | |
| Other current assets: | ||||
| Current portion of indirect tax receivables | 157,936 | 50,787 | 128,423 | |
| Other receivables and advance payments1 | 32,932 | 35,443 | 21,095 | |
| Total | 190,868 | 86,230 | 149,518 | |
1 Other receivables and advance payments relate to prepayments for insurance and income taxes offset against outstanding refunds for VAT and fuel levies and current amounts receivable from the NSSF of US$2.3 million (2016: US$5.0 million).
16. Borrowings
During 2013, a US$142 million facility was put in place to fund the bulk of the costs of the construction of one of Acacia’s key growth projects, the Bulyanhulu CIL Expansion project (“Project”). The Facility is collateralised by the Project, has a term of seven years with a spread over Libor of 250 basis points. In common with borrowing agreements of this nature the facility includes various covenants as well as a material adverse effect clauses. The interest rate has been fixed at 3.6% through the use of an interest rate swap. The 7 year Facility is repayable in equal $14.2 million bi-annual instalments over the term of the Facility, after a two year repayment holiday period. The full facility of US$142 million was drawn at the end of 2013. The first principal payment of US$14.2 million was paid in H2 2015 and regular repayments have been made each half year. As at 30 June 2017 the balance owing was US$85.2 million (2016: US$99.4 million) all covenants have been complied with. Interest accrued to the value of US$0.6 million (2016: US$0.6 million) was included in accounts payable at the end of the period. Interest incurred on the borrowings as well as hedging losses on the interest rate swap for the period ended 30 June 2017 was US$1.2 million (2016: US$4.0 million).
17. Cash flow – other items
a) Operating cash flows - other items
Movements relating to working capital items
| For the six months ended 30 June |
For the year ended 31 December |
||
| (Unaudited) | (Unaudited) | (Audited) | |
| (in thousands of United States dollars) | 2017 | 2016 | 2016 |
| Indirect and corporate taxes1 | (51,047) | (13,015) | (59,100) |
| Increase in current indirect tax receivable | (33,747) | (3,015) | (18,224) |
| Prepaid corporate tax | - | (10,000) | (20,000) |
| Income tax paid | (17,300) | - | (20,876) |
| Other current assets | 6,519 | 4,512 | 695 |
| Trade receivables | 6,931 | (5,756) | (4,472) |
| Inventories2 | (113,217) | (7,770) | (8,312) |
| Other liabilities | (7,626) | (3,027) | 33,582 |
| Share based payments3 | (834) | 19,635 | (35,966) |
| Trade and other payables4 | 795 | (10,905) | 15,931 |
| Other working capital items5 | (1,218) | 20 | (855) |
| Total | (159,697) | (16,306) | (58,497) |
1 During the year, we have made US$17.3 million (US$20 million 2016) corporate tax provisional payments. This has been funded through an offset against current indirect taxes that was due for refund.
2 The inventory adjustment includes the movement in current as well as the non-current portion of inventory.
3 During the year, share based payments of US$0.8 million was made.
4 The trade and other payables adjustment exclude statutory liabilities in the form of income tax payable.
5 Other working capital items include exchange losses associated with working capital.
Other non-cash items
| For the six months ended 30 June |
For the year ended 31 December |
||
| (Unaudited) | (Unaudited) | (Audited) | |
| (in thousands of United States dollars) | 2017 | 2016 | 2016 |
| Adjustments for non-cash income statement items: | |||
| Foreign exchange (gains)/losses | 4,734 | (1,070) | (1,463) |
| Discounting of indirect tax receivables | - | (6,508) | (9,719) |
| Provisions settled | 2,101 | (11) | (8) |
| Unrealised gain on derivatives | 2,431 | (1,352) | (13,031) |
| Stock option expense | 6 | 49 | 77 |
| Provisional tax offsets | (17,300) | - | - |
| Other non-cash items | (30) | (105) | 36 |
| Exchange loss on revaluation of cash balances | (151) | 45 | 258 |
| Total | (8,209) | (8,952) | (23,850) |
b) Investing cash flows - other items
| For the six months ended 30 June |
For the year ended 31 December |
||
| (Unaudited) | (Unaudited) | (Audited) | |
| (in thousands of United States dollars) | 2017 | 2016 | 2016 |
| Proceeds on sale of property, plant and equipment | - | 40 | 6,713 |
| Other long-term receivables | 29 | (125) | (10) |
| Rehabilitation expenditure | (250) | (110) | (175) |
18. Commitments and Contingencies
The Group is subject to various laws and regulations which, if not observed, could give rise to penalties. As at 30 June 2017, the Group has the following commitments and/ or contingencies.
a) Legal contingencies
As at 30 June 2017, the Group was a defendant in a number of lawsuits. The plaintiffs are claiming damages and interest thereon for the loss caused by the Group due to one or more of the following: unlawful eviction, termination of services and/or, non-payment for services, defamation, negligence by act or omission in failing to provide a safe working environment, unpaid overtime, public holiday compensation and various other commercial/project disputes.
The Group’s Legal Counsel is defending the Group’s current position, and the outcome of the lawsuits cannot presently be determined. However, in the opinion of the Directors and Group’s Legal Counsel, no material liabilities are expected to materialise from these lawsuits that have not already been provided for.
b) Tax-related contingencies
The TRA has issued a number of tax assessments to the Group related to past taxation years from 2002-onwards. The Group believes that the majority of these assessments are incorrect and has filed objections and appeals accordingly in an attempt to resolve these matters by means of discussions with the TRA or through the Tanzanian appeals process. These include the following:
19. Related party balances and transactions
The Group has related party relationships with entities owned or controlled by Barrick Gold Corporation, which is the ultimate controlling party of the Group.
The Company and its subsidiaries, in the ordinary course of business, enter into various sales, purchase and service transactions and other professional services arrangements with others in the Barrick Group. These transactions are under terms that are on normal commercial terms and conditions. These transactions are not considered to be significant.
At 30 June 2017 the Group had no loans of a funding nature due to or from related parties (30 June 2016: zero; 31 December 2016: zero).
Copyright y 20 PR Newswire
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