We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| 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 |
Hot Features
Premium
TIDMACA
14 February 2017
Results for the 12 months ended 31 December 2016 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc ("Acacia") reports full year 2016 results
"2016 was another successful year for Acacia as we delivered record production,
reduced our all-in sustaining costs by 14% and more than doubled our net cash
position" said Brad Gordon, Chief Executive Officer of Acacia Mining. "This
excellent operational performance translated into strong financial performance
with EBITDA more than doubling to US$415 million and adjusted net earnings
increasing to US$161 million. We continued to invest into our exploration
portfolio and are poised to announce a maiden resource on the West Kenya
project, in which we strategically increased our interest to 100% in 2016. As a
result of this strong underlying performance in 2016, the Board of Directors
has proposed a full year dividend of 10.4 cents (final dividend of 8.4 cents)
which is at the top end of our policy and more than twice the total dividend
announced for 2015 (4.2 cents). We expect 2017, driven by the mine life
extension at Buzwagi, to see further production growth and cost reductions,
with production expected to be between 850,000-900,000 ounces at an AISC of
between US$880-920 per ounce.
Financial Highlights
· Revenue of US$1,054 million, 21% higher than 2015, due to a 13% increase
in gold sales and a 7% higher gold price
· EBITDA1 of US$415 million, more than doubled from 2015, mainly due to
higher revenues and lower operating costs
· Net earnings of US$95 million (US23.2 cents per share), with adjusted net
earnings1 of US$161 million (US39.2 cents per share), is up from US$7 million
in 2015
· Operational cash flow of US$318 million, 103% up on 2015, driven
primarily by higher EBITDA
· Proposed final dividend of US8.4 cents per share, total 2016 dividend of
US10.4 cents per share, more than double 2015
· Net cash of US$218 million, an increase of 107% during 2016
· Cash on hand of US$318 million as at 31 December 2016, an increase of
US$85 million during the year
Operational Highlights
· Gold production of 829,705 ounces, 13% higher than 2015, with gold sales
of 816,743 ounces
· Cash costs1 of US$640 per ounce sold,17% lower than 2015
· AISC1 of US$958 per ounce sold, 14% below 2015, including a US$37 per
ounce share-based payment charge
· North Mara achieved record annual production of 378,443 ounces at AISC of
US$733 per ounce sold
· Bulyanhulu overcame significant downtime in Q3 2016 and delivered
production of 289,432 ounces, 6% higher than 2015
· Six month extension of mining at Buzwagi, which will lead to a 40%
increase in production compared to 2016
Three months ended 31 Year ended 31
December December
(Unaudited) 2016 2015 2016 2015
Gold production (ounces) 212,954 200,723 829,705 731,912
Gold sold (ounces) 209,292 198,617 816,743 721,203
Cash cost (US$/ounce)1 679 728 640 772
AISC (US$/ounce)1 952 1,004 958 1,112
Net average realised gold price (US$/ 1,211 1,107 1,240 1,154
ounce)1
(in US$'000)
Revenue 263,890 228,668 1,053,532 868,131
EBITDA 1 105,681 57,630 415,388 174,971
Adjusted EBITDA1 103,010 59,166 409,903 180,916
Net earnings/(loss) 48,285 (198,860) 94,944 (197,148)
Basic earnings/(loss) per share (EPS) 11.8 (48.5) 23.2 (48.1)
(cents)
Adjusted net earnings1 46,415 2,040 161,021 6,838
Adjusted net earnings per share (AEPS) 11.3 0.5 39.2 1.7
(cents)1
Cash generated from operating 60,933 45,110 317,976 156,465
activities
Capital expenditure2 57,826 42,931 195,898 183,617
Cash balance 317,791 233,268 317,791 233,268
Long term borrowings 99,400 127,800 99,400 127,800
1 These are non-IFRS measures. Refer to page 26 for definitions
2 Excludes non-cash capital adjustments (reclamation asset adjustments) and
include finance lease purchases and land purchases recognised as long term
prepayments
CEO Statement
2016 was a landmark year for Acacia as we delivered record group production of
829,705 ounces, which was almost 100,000 ounces ahead of 2015. It also exceeded
our initial guidance range for the year of 750,000-780,000 ounces and revised
guidance given in October 2016, of approximately 820,000 ounces. Performance
was driven by North Mara, where the mine had a record year and at Bulyanhulu,
which registered its highest production year for ten years, testament to the
work we have undertaken to turn the asset around.
We also saw a substantial fall in our all-in sustaining costs (AISC) to US$958
per ounce, which was 14% below 2015 levels and at the bottom of our guidance
range of US$950-980 per ounce. This was a result of the changes that were made
to the business in late 2015, improved operating efficiencies at the assets and
the increased production profile. If we were to focus purely on asset
performance, and remove the impact of the increase in the share price on the
valuation of share based payments, our AISC would have been US$921 per ounce,
17% below 2015 and well below our guidance range.
I was especially pleased with the return to free cash generation during the
year, which is our primary focus. Over the past twelve months we doubled our
net cash on the balance sheet to US$218 million which provides significant
flexibility for us going forward. At the same time, the success of North Mara
meant that a corporate tax charge amounting to US$55 million was incurred,
which included a US$20 million cash pre-payment agreed with the Tanzanian
Revenue Authority in Q1 2017.
Year in Review
2016 was a very strong operational year as we saw the benefit of the first full
year of operations at the Gokona Underground at North Mara. This deposit was
previously mined as a high grade open pit and commenced underground mining in
mid-2015 after we made the strategic decision to go underground in 2014. The
mine delivered ahead of expectations in 2016, partly due to a 61% increase in
mined grade compared to the resource model. This drove additional ounces and
the overall mine achieved a record production year of 378,443 ounces, a 32%
increase over 2015. At Bulyanhulu we overcame an extended process plant
shutdown in the third quarter which led to a loss of approximately one month of
milling capacity to deliver 289,432 ounces, a 6% increase on 2015. This
demonstrates the increased operational resilience as part of our ongoing
programme to unlock the geological and operational potential of the asset. At
Buzwagi, production was behind expectations at 161,830 ounces, 5% below 2015 as
a result of lower mined grades due to a change in pit sequencing in order to
enhance operational efficiencies as part of the extension of mining in 2017.
On the cost side, we demonstrated further improvement in AISC as the
operational efficiencies and increased production rates took effect. North Mara
was again the standout performer, with an AISC of US$733 per ounce, which was
20% lower than 2015 driven by the increased production base. At Bulyanhulu,
AISC fell by a further 16% to US$1,058 per ounce as a result of the
restructuring that took place in Q4 2015. At Buzwagi we saw AISC above plan at
US$1,095 per ounce due to the lower ounce profile, though this was still 8%
lower than 2015. Together, this led to a 14% fall in the headline AISC to
US$958 per ounce, over US$150 per ounce lower than 2015. On an annual basis
this now represents a 43% reduction in AISC from its peak in 2012.
The strong performance meant that we ended the year with US$318 million of cash
on our balance sheet, an increase of US$85 million over the previous year. This
includes the US$20 million corporate tax cash pre-payment, US$28 million on
debt repayments, US$20 million on dividends and US$36 million on share based
payments as a result of the vesting of awards during the year. As a result, net
cash on the balance sheet more doubled from US$106 million, ending the year at
US$218 million.
Total revenue for the year amounted to US$1,054 million which was 21% ahead of
2015 as a result of the increased production profile and the US$96 per ounce
higher average realised gold price. EBITDA was similarly strong at US$415
million, up from US$175 million in 2015. We had net earnings of US$95 million,
which were primary impacted by a US$72 million provision as a result of
historic tax cases, but were still significantly ahead of 2015's loss of US$197
million. Adjusted net earnings amounted to US$161 million, which was US$154
million above 2015.
Reserves and Resources
Notwithstanding the strengthening of the gold price in 2016 we have taken the
decision to maintain the 2015 gold price assumptions in our reserve and
resource calculations. This not only brings consistency of planning on an
annual basis but it also helps underpin the financial robustness of our
long-term planning. Our reserve pricing is maintained at US$1,100 per ounce and
our resource pricing has been maintained at US$1,400 per ounce.
On a group basis, our overall reserves and resources declined by 4% from 28.6
million ounces to 27.5 million ounces during the year. At our operating mines,
total reserves and resources declined by 861,000 ounces, which was primarily a
result of depletion. At our exploration properties we had a marginal reduction
of 112,000 ounces as a result of the inclusion of our share of the South Houndé
resource in Burkina Faso which largely offset the change to the methodology of
how we account for the Nyanzaga joint venture resource which has been converted
from a large scale low grade resource to a smaller high grade resource from a
combined open pit and underground.
Whilst total Reserves and Resources were largely flat, Reserves fell by 1.1
million ounces to 7.6 million ounces. In addition to depletion, this is largely
a result of the reclassification of approximately 583,000 ounces of Reef 2
material at Bulyanhulu from Reserves into Inferred Resources as a result of the
change in the required drill spacing for underlying resource classifications.
Prior to recent drilling programmes, the search radius for Reef 1 and Reef 2
were the same, with a 100 metre search radius around each drill hole used for
Indicated Resources (which can then be converted into a Probable Reserve) and a
200 metre search radius used for Inferred material. Following the recent
drilling, the variography has shown that due to the different geometries of the
Reef 2 series the 100 metre search radius is not appropriate and has been
reduced to 50 metres. This has meant that some ounces previously classified as
Probable Reserves (based on the underlying indicated resource) have now largely
been moved to Inferred Resources. We are undertaking drilling programmes during
2017 to reduce drill spacing in available areas to bring material back into the
Indicated categories and will continue this programme over the coming years.
This change to the classification of Resources at Bulyanhulu, together with
depletion, has meant that Reserves in the underground mine declined by 1.0
million ounces to 4.9 million ounces. However, the grade of the Reserves has
increased from 8.85g/t in 2015 to 9.75g/t as a result of the change to cut-off
grade calculations and the reduction in the mill reconciliation factor which
had previously been included as a result of mill performance in 2015.
At North Mara, we largely replaced Reserves in the Gokona deposit despite
mining approximately 225,000 ounces from the underground in 2016, at a
significantly higher grade than included in the prior year Reserves
declaration. This Reserves replacement was a result of changes to the
underground Grade Control model due to our improved understanding of the ore
body which included additional stope designs. We expect to complete the
technical work to better estimate the future impact of the positive
reconciliations received during 2016 in late Q1 2017. As such the results of
this work have not yet been incorporated into the current Reserves statement.
In the Nyabirama pit we saw depletion of 170,000 ounces during 2016, of which
approximately 111,000 ounces were replaced as a result of Grade Control model
updates. Together, this led to reserves at North Mara falling by 83,000 ounces
to 1.9 million ounces.
We believe that the current Reserves position at North Mara does not reflect
the potential of either of the ore bodies at the mine and in 2017 are
commencing extension programmes to identify new resources and upgrade existing
resources at both Gokona and Nyabirama. We are targeting significant upgrades
to the Reserves and Resources at the mine over the next several years as part
of our target to produce more than 300,000 ounces per annum for at least ten
years at North Mara.
At Buzwagi, the extension of mining by a further six months led to the
inclusion of 152,000 ounces of Resources into Reserves which meant that the
mine fully replaced Reserves. Buzwagi now has 6.0 million tonnes of in-pit
Reserves at 1.7 grams per tonne which will be mined during 2017, with lower
grade material stockpiled for processing in 2018 and beyond.
Discovery
We had a very positive year in exploration and expect to announce the maiden
resource on the West Kenya Project in Q1 2017. I am confident that this will
confirm that it has the making of a very high quality asset. We will provide
more details on this as we go through the year but believe that this resource
is the first step in delineating a multi-million ounce high grade resource in
the Liranda Corridor in Kenya.
We also made progress in West Africa and continued to expand our land package
on the highly prospective Houndé belt in Burkina Faso. We now have a licence
area of 2,700 square kilometres through four joint ventures which provides
access to 125 strike kilometres on the belt. As part of this programme we have
completed the first stage of the earn-in on the South Houndé joint venture with
Sarama Resources and as a result now own 50% of the joint venture and have
taken over operatorship of the project. Due to this we have consolidated 50% of
the 2.1 million ounce resource on the project into our resource statement. In
Mali, we took our first steps in exploring the licences we have acquired with
promising initial results and will continue to look to expand our land package
on the Senegal-Mali shear zone.
The joint venture with OreCorp Limited to progress our Nyanzaga Project in
Tanzania continues to move forward. OreCorp took over management of the project
for a three year period in late 2015. This structure allows the project to be
progressed whilst giving Acacia the optionality to maintain a 75% stake in the
project once it reaches a development decision. During the year OreCorp
competed a scoping study on the project which outlined a combined open pit and
underground project that produces 2.4 million ounces of gold over a 13 year
life at an AISC of US$798/oz and requires pre-production capital of US$248
million (inclusive of contingency). OreCorp are now undertaking a
pre-feasibility study which is due to be complete in the coming months.
Safety
Safety performance during 2016 was disappointing as regrettably in January
2016, one of our contractors at North Mara passed away as a result of a haul
truck accident. We also saw an increase in our total reportable injury
frequency rate of 9% to 0.74. This was driven by an increase at Bulyanhulu,
although we saw an improvement in safety performance in the fourth quarter at
the mine. Despite these disappointing results we did see areas of improvement,
with Buzwagi's TRIFR reducing by 44%, as we fully embedded our behavioural
safety programme, "Tunajali" or "We Care" into the business and at North Mara
we saw safety performance remaining in line with 2015 levels despite the
increased level of complexity of operations. We also saw a 46% reduction in the
number of High Potential Incidents (incidents that could under slightly
different circumstances have led to a fatality or permanent disability). We
continue to target zero injuries and having every person going home safely
every day.
Operating Environment
As a major contributor to the Tanzanian economy we were pleased to be able to
increase our contribution during 2016 through incurring a corporate tax charge
amounting to US$55 million. This was a result of the strong performance at
North Mara and included our agreement to pre-pay US$20 million of cash
corporate taxes. Our increase in tax payments, which when added to royalties of
US$47 million, payroll taxes of US$40 million and other taxes of approximately
US$20 million provides a significant contribution to the Tanzanian Government's
aim of self-funding the national budget.
During 2016 there have continued to be a number of tax cases that are being
dealt with in the court system in Tanzania which we are seeking to resolve. As
communicated earlier in the year, we recorded a tax provision of US$69.6
million in respect of historic capital deductions at Bulyanhulu, North Mara and
Tulawaka as a result of a Court of Appeal ruling. We are also dealing with
claims to levy taxes in Tanzania on the UK registered Acacia Mining plc which
we believe have no basis in law given this company is tax resident and
permanently established in the UK. Given the materiality of the amounts being
claimed, we are also addressing a constructive resolution of these issues as
part of our ongoing engagement with the Tanzania Revenue Authority ("TRA") as
well as at a senior level in the Government.
During the year we also saw a build-up in the total indirect tax receivables
from US$110.2 million as at 31 December 2015 to US$136.4 million as at 31
December 2016. The increase was mainly due to a significant delay in VAT
refunds in the second half of 2016 as a result of ongoing audits by the
Tanzanian Revenue Authority on submitted VAT. We continue to engage with the
TRA in order that they approve the payment of outstanding amounts as well as
returning to the previously agreed timeline of three months for dealing with
ongoing claims for refund.
Final dividend
Our dividend policy is based on cash flow in order to ensure that it is closely
aligned with the focus on cash generation within the business. As a result 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.
In line with this policy, in July we declared an interim dividend of 2.0 cents
per share, which was a 43% increase on 2015. As a result of strong performance
in the second half of the year, we are pleased to recommend a final dividend of
8.4 cents per share. This represents a full year pay-out of 10.4 cents per
share, or US$43 million, which is at the top of the pay-out range and more than
twice 2015. The decision to recommend a dividend at the top of the range
reflect the confidence we have in the business, the significant free cash flow
the company generated in 2016 and the fact that we are able to fund out of free
cash flow the organic projects currently in our pipeline. We believe the
distributing of capital to our shareholders is a key differentiator for Acacia
and continues our track record of providing strong total returns to our
shareholders across the cycle.
Outlook
The group delivered another year of strong performance in 2016 and we expect
that we will further improve on this in 2017 with production increasing to
between 850,000-900,000 ounces at a lower all-in sustaining cost of between
US$880-920 per ounce. Cash costs per ounce are also expected to decline from
US$640 per ounce to between US$580-620 per ounce in 2017. We expect production
to increase through the year and as such we expect a production ratio of 45:55
in terms of the first half versus the second half of the year, which will have
a commensurate impact on our cost profile and our cash generation.
The further improvement in operating metrics is primarily driven by the
revision to the mine plan at Buzwagi, where mining has been extended by
approximately six months. This will lead to the mining of approximately 2
million tonnes more of higher grade ore during 2017 than previously planned and
will drive a step up of approximately 40% in production over 2015 and a
reduction in AISC of up to 30%.
At Bulyanhulu, we expect production to be in line with the previous year and
AISC to reduce by up to 5%. We expect to see a reduction in cash costs, but
will see an increase in sustaining capital as we invest to enhance the
operation of the process plant and undertake a targeted fleet renewal programme
to improve operating efficiencies amongst the older equipment within the
underground fleet. We also continue to invest in underground development and in
support of this will be upgrading ventilation and paste line infrastructure as
we focus on creating greater flexibility underground. This investment in core
infrastructure is a critical element in optimising the value delivery from this
long-life, high grade asset in combination with continuing to drive cost
savings and improve mining efficiencies.
North Mara performed ahead of expectations during 2016 and as a result we
expect production to reduce by up to 10% during 2017 as an increased proportion
of underground ore is sourced from the lower grade West Zone which will offset
the impact of the increase in underground tonnes mined. The reduction in
production, together with an increase in capital as we invest in the delivery
of increased underground mining rates, together with open pit waste stripping
will mean that AISC will increase by up to 10%.
As a result of the investments into both Bulyanhulu and North Mara outlined
above we expect to see capital expenditure in 2017 of between US$210-230
million. This is comprised of approximately US$75-85 million of sustaining
capital, US$120-130 million of capitalised development / stripping and US$15
million of expansion capital, made up predominantly of capitalised drilling at
North Mara as we look to delineate additional resources to support a 10 year
life of mine producing in excess of 300,000 ounces per annum.
As previously indicated we plan to increase our greenfield exploration spend to
approximately US$25 million, as we look to build on the excellent progress made
in Kenya during 2016 and we step up our exploration activity in Burkina Faso
and Mali on our expanded land packages there.
Finally, I would like to thank all of my colleagues for their commitment,
enthusiasm and hard work throughout what has been a year of continued delivery
at Acacia. We have made further progress on the journey to making this company
a leader in Africa and I am looking forward to an even better year in 2017. I
would also like to thank our Board for their support and guidance through the
year.
Brad Gordon
Chief Executive Officer
Key Statistics Three months ended Year ended 31
31 December December
(Unaudited) 2016 2015 2016 2015
Tonnes mined (thousands of tonnes) 9,644 10,128 38,491 41,390
Ore tonnes mined (thousands of tonnes) 2,584 2,822 9,419 10,311
Ore tonnes processed (thousands of tonnes) 2,567 2,413 9,818 9,268
Process recovery rate exc. tailings reclaim 92.5% 90.9% 92.3% 89.7%
(percent)
Head grade exc. tailings reclaim (grams per 3.2 3.2 3.3 3.1
tonne)
Process recovery rate inc. tailings reclaim 88.9% 87.5% 88.5% 87.4%
(percent)
Head grade inc. tailings reclaim (grams per 2.9 3.0 3.0 2.8
tonne)
Gold production (ounces) 212,954 200,723 829,705 731,912
Gold sold (ounces) 209,292 198,617 816,743 721,203
Copper production (thousands of pounds) 4,255 4,496 16,239 14,981
Copper sold (thousands of pounds) 3,384 3,720 14,745 13,318
Cash cost per tonne milled exc. tailings reclaim 66 69 62 68
(US$/t)1,3
Cash cost per tonne milled inc. tailings reclaim 55 60 53 60
(US$/t)1,3
Per ounce data
Average spot gold price2 1,222 1,106 1,251 1,160
Net average realised gold price1 1,211 1,107 1,240 1,154
Total cash cost1 679 728 640 772
All-in sustaining cost1 952 1,004 958 1,112
Average realised copper price (US$/lb) 2.45 2.03 2.21 2.33
Financial results
Three months ended 31 Year ended 31
December December
(Unaudited, in US$'000 unless 2016 2015 2016 2015
otherwise stated)
Revenue 263,890 228,668 1,053,532 868,131
Cost of sales (196,314) (196,874) (727,080) (734,167)
Gross profit 67,576 31,794 326,452 133,964
Corporate administration (6,218) (7,308) (21,895) (34,455)
Share based payments 9,795 284 (29,929) (5,537)
Exploration and evaluation costs (7,330) (4,984) (24,020) (19,737)
Corporate social responsibility (3,068) (3,348) (10,665) (12,882)
expenses
Impairment charges - (146,201) - (146,201)
Other income (charges) 1,208 (2,172) 11,649 (28,079)
Profit/(loss) before net finance 61,963 (131,935) 251,592 (112,927)
expense and taxation
Finance income 365 258 1,512 1,384
Finance expense (2,644) (2,888) (11,047) (12,617)
Profit/(loss) before taxation 59,684 (134,565) 242,057 (124,160)
Tax credit/(expense) (11,399) (64,295) (147,113) (72,988)
Net profit/(loss) for the year 48,285 (198,860) 94,944 (197,148)
1 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures" on page 26 for definitions.
2 Reflect the London PM fix price.
For further information, please visit our website: 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
Bell Pottinger +44 (0) 203 772 2500
Lorna Cobbett
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 14 February 2017 at
Noon London time.
For those unable to attend, an audio webcast of the presentation will be
available on our website www.acaciamining.com. For those who wish to ask
questions, the access details for the conference call are as follows:
Participant dial +44 (0) 20 3003 2666
in:
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 14
Financial Review 19
Significant judgements in applying accounting policies and key sources of 25
estimation uncertainty
Non-IFRS measures 26
Risk Review 30
Condensed Financial Information:
- Consolidated Income Statement and Consolidated Statement of Comprehensive 31/32
Income
- Consolidated Balance Sheet 33
- Consolidated Statement of Changes in Equity 34
- Consolidated Statement of Cash Flows 35
- Notes to the Condensed Financial Information 36
Operating Review
Acacia delivered production of 829,705, an increase of 13% year on year, while
AISC of US$958 per ounce sold and cash cost of US$640 per ounce sold were 14%
and 17% respectively lower than 2015.
North Mara's production for the full year of 378,443 ounces was 32% higher than
in 2015, and a record for the mine. This was as a result of a 25% higher head
grade driven by the higher mining grade achieved from the Gokona underground
mine (15.6 g/t) and a 4% improvement in recoveries. Gold ounces sold for the
full year of 376,255 ounces were 30% higher than the prior year and broadly in
line with production. AISC fell by 20% to US$733 per ounce sold predominantly
due to the higher production base and lower cash costs.
Bulyanhulu saw a 6% increase in production to 289,432 ounces, the highest
production level achieved since 2006, after it overcame significant plant
downtime in Q3 2016. Ounces produced from underground mining increased by 6%
from 2015, as a result of an 8% increase in grade in combination with a 3%
increase in throughput due to improved plant availability and underground
delivery. Ounces produced from tailings retreatment increased by 4% due to 21%
higher throughput and 8% higher head grade, partly offset by 19% lower recovery
rates. AISC decreased by 16% to US$1,058 per ounce sold due to the higher
production base, lower direct mining costs and lower sustaining capital
expenditure.
At Buzwagi, gold production of 161,830 ounces was 5% lower than 2015 due to a
14% decrease in grade as a result of ore being primarily sourced from lower
grade splay material. This was partly offset by an 8% increase in throughput
due to improved mill availability and improved milling rates. AISC decreased by
8% to US$1,095 per ounce sold from US$1,187 per ounce sold in 2015, mainly due
to lower cash costs.
Total tonnes mined during the year amounted to 38.5 million tonnes, 7% lower
than 2015 primarily due to lower waste tonnes mined at Buzwagi. Ore tonnes
mined of 9.4 million tonnes were 9% lower than 2015 mainly due to lower ore
tonnes from the Nyabirama open pit at North Mara as mining focused on waste
stripping of the next stage of the pit.
Ore tonnes processed amounted to 9.8 million tonnes, an increase of 6% on 2015,
primarily driven by increased throughput at Bulyanhulu as reprocessed tailings
increased from 1.4 million tonnes in 2015 to 1.7 million tonnes in 2016.
Head grade for the year (excluding tailings retreatment) of 3.3g/t was 6.5%
higher than in 2015 (3.1g/t). This was due to a 25% increase in head grade at
North Mara due to the contribution of the higher grade Gokona underground ore
and an 8% higher head grade at Bulyanhulu due to an increase in mine grade,
which was partially offset by a 14% decrease in head grade at Buzwagi due to
the mining of lower grade splay areas.
Our cash costs for the year were 17% lower than in 2015, and amounted to US$640
per ounce sold. The decrease was primarily due to:
? Higher production base (US$76/oz);
? Higher capitalisation of development costs mainly at North Mara due to
higher waste stripping at Nyabirama Stage 4 (US$39/oz);
? Lower labour costs due to a reduction in employees, together with a
favourable currency impact on Tanzanian shilling based wages when compared to
2015 (US$23/oz); and
? Lower energy and fuel costs due to lower fuel prices and an increased
reliance on grid power (US$13/oz).
These were partly offset by higher sales related costs as a result of higher
sales volumes (US$17/oz) and increased contracted services, mainly related to
increased contracted mining and drilling at North Mara (US$12/oz).
All-in sustaining cost of US$958 per ounce sold for the year was 14% lower than
2015, driven by lower cash costs (US$132/oz) (refer to above) and an increased
production base (US$40/oz), lower sustaining capital expenditure (US$25/oz) and
lower corporate administration costs (US$15/oz). This was partly offset by
higher capitalised development mainly at North Mara (US$36/oz) and the impact
of a higher revaluation charge relating to future share-based payments compared
to 2015 amounting to US$24.4 million (US$30/oz) following the 108% increase in
Acacia's share price over the year.
Cash generated from operating activities of US$318.0 million doubled from 2015.
EBITDA of US$415.4 million was in part offset by corporate tax payments of
US$40.9 million and outflows associated with working capital items of US$17.6
million, mainly relating to indirect taxes and net finance charges of US$7.2
million
Capital expenditure amounted to US$195.9 million compared to US$183.6 million
in 2015. Capital expenditure primarily comprised of capitalised development
(US$138.7 million), investment in mobile equipment and component change-outs
(US$31.3 million), investments in tailings and infrastructure (US$16.8
million), land purchases at North Mara (US$4.8 million) and investment in the
Bulyanhulu winder upgrade (US$2.0 million).
Mine Site Review
Bulyanhulu
Key statistics
Three months ended 31 Year ended 31
December December
(Unaudited) 2016 2015 2016 2015
Key operational information:
Ounces produced oz 79,859 78,223 289,432 273,552
Ounces sold oz 74,803 79,233 279,286 265,341
Cash cost per ounce sold1 US$/oz 784 653 722 797
AISC per ounce sold1 US$/oz 1,061 999 1,058 1,253
Copper production Klbs 1,707 1,774 6,391 6,308
Copper sold Klbs 1,309 1,559 5,570 5,424
Run-of-mine:
Underground ore tonnes hoisted Kt 244 292 909 993
Ore milled Kt 263 268 933 983
Head grade g/t 9.1 8.7 9.3 8.6
Mill recovery % 91.8% 88.8% 91.4% 88.5%
Ounces produced oz 70,808 66,874 254,552 240,044
Cash cost per tonne milled1 US$/t 209 176 197 195
Reprocessed tailings:
Ore milled Kt 451 380 1,650 1,368
Head grade g/t 1.3 1.6 1.4 1.3
Mill recovery % 47.2% 56.6% 45.8% 56.6%
Ounces produced oz 9,051 11,349 34,880 33,508
Capital Expenditure
- Sustaining capital US$ 3,833 10,185 20,231 42,419
('000)
- Capitalised development US$ 15,996 11,563 63,082 59,830
('000)
- Expansionary capital US$ 188 234 1,262 (957)
('000)
20,017 21,982 84,575 101,292
- Non-cash reclamation asset US$ 3,853 (3,875) 10,728 (5,663)
adjustments ('000)
Total capital expenditure US$ 23,870 18,107 95,303 95,629
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 26 for definitions.
Operating performance
Gold production of 289,432 ounces was 6% above 2015, mainly driven by an 8%
increase in run-of-mine head grade as underground mining grades improved, and a
3% increase in recovery, partly offset by 5% lower throughput due to the plant
shutdown in Q3 2016. This was in combination with a 4% increase in production
from reprocessed tailings as a result of increased throughput combined with an
8% increase in grade recovered.
Gold sold for the year of 279,286 ounces, was 5% lower than production as a
result of logistical delays related to concentrate shipments experienced in
December 2016.
Copper production of 6.4 million pounds for the current year period was in line
with 2015, as lower throughput was offset by improved copper grades
Cash costs of US$722 per ounce sold were 9% lower than 2015 (US$797), mainly
due to the higher production base (US$64/oz), lower labour costs mainly driven
by a reduction in headcount (US$40/oz), partly offset by higher sales related
costs due to higher volumes (US$12/oz) and increased costs associated with
self-generation of power given concerns around the impact of grid instability
on process plant performance.
AISC per ounce sold for the year of US$1,058 was 16% lower than 2015 (US$1,253)
driven by the impact of lower sustaining capital ($79/oz), lower cash costs
($75/oz); lower corporate administration expenditure ($28/oz) and the impact of
the higher production base ($23/oz). This was partially offset by higher
capitalised development costs ($12/oz).
Capital expenditure for the year before reclamation adjustments amounted to
US$84.6 million, 17% lower than 2015 (US$101.3 million), mainly driven by lower
sustaining capital expenditure partly offset by higher capitalised development.
Capital expenditure mainly consisted of capitalised underground development
costs (US$63.1 million), investment in mobile equipment and component
change-outs (US$10.6 million), investment in tailings and infrastructure
(US$8.3 million) and investments in the winder upgrade (US$2.0 million).
In 2017 we expect to see an increase of US$20 million in the level of
sustaining capital incurred at the mine, predominantly driven by investment
into enhancing the operation of the process plant and a targeted fleet renewal
programme to improve operating efficiencies amongst the older equipment within
the underground fleet. We also continue to invest in underground development
and in support of this will be upgrading ventilation and paste line
infrastructure as we focus on creating greater flexibility underground. This
investment in core infrastructure is a critical element in optimising the value
delivery from this long-life, high grade asset in combination with continuing
to drive cost savings and improve mining efficiencies.
Buzwagi
Key statistics
Three months ended 31 Year ended 31
December December
(Unaudited) 2016 2015 2016 2015
Key operational information:
Ounces produced oz 41,912 45,196 161,830 171,172
Ounces sold oz 41,514 41,879 161,202 166,957
Cash cost per ounce sold1 US$/oz 1,035 1,101 1,031 1,046
AISC per ounce sold1 US$/oz 1,056 1,236 1,095 1,187
Copper production Klbs 2,547 2,721 9,847 8,672
Copper sold Klbs 2,075 2,160 9,175 7,894
Mining information:
Tonnes mined Kt 5,090 5,573 21,585 24,989
Ore tonnes mined Kt 1,509 1,432 5,317 5,658
Processing information:
Ore milled Kt 1,159 1,060 4,404 4,085
Head grade g/t 1.2 1.4 1.2 1.4
Mill recovery % 94.5% 94.8% 94.5% 94.1%
Cash cost per tonne milled1 US$/t 37 44 38 43
Capital Expenditure
- Sustaining capital US$ 264 2,741 3,582 10,855
('000)
- Capitalised development US$ - - - 1,480
('000)
264 2,741 3,582 12,335
- Non-cash reclamation asset US$ 3,312 (8,857) 4,524 (7,364)
adjustments ('000)
Total capital expenditure US$ 3,576 (6,116) 8,106 4,971
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non-IFRS measures" on page 26 for definitions.
Operating performance
Gold production for the full year of 161,830 ounces was 5% lower than in 2015
due to a 14% decrease in grade as a result of the focus on waste movement in
the first half of the year and the mining of ore from lower grade splay areas.
This was partly offset by an 8% increase in throughput due to improved mill
availability and improved milling rates.
Total tonnes mined of 21.6 million tonnes were 14% lower than 2015, primarily
due to lower waste tonnes mined at Buzwagi as a result of the movement of rill
material impacting on equipment productivity, in combination with general lower
equipment availability.
Copper production of 9.8 million pounds for the year was 14% higher than the
prior year period due to increased throughput and copper recovery rates, partly
offset by lower copper grades.
Cash costs for the year of US$1,031 per ounce sold were marginally lower than
2015, primarily driven by lower fuel costs due to lower global fuel prices and
lower consumption ($51/oz), lower general and administration costs as a result
of the optimisation of warehousing and logistics processes ($49/oz), lower
consumables costs primarily as a result of process plant improvements ($39/oz)
and lower labour costs as a result of a reduction in headcount ($26/oz). This
was partially offset by the impact of the lower production base ($37/oz).
AISC per ounce sold of US$1,095 was 8% lower than the prior year. This was
mainly driven by lower capital expenditure (US$54/oz), lower corporate
administration expenditure ($26/oz) and lower cash costs ($15/oz).
Capital expenditure before reclamation adjustments of US$3.6 million was 71%
lower than 2015 (US$12.3 million). Key capital expenditure for the year
consists of investments in the tailings storage facility and infrastructure of
US$2.8 million and mobile equipment and component change out costs of US$0.2
million.
In the first half of the year we entered into zero cost collars in relation to
the majority of our gold production from Buzwagi in 2016 and Q1 2017. In 2016,
the agreements covered 81,000 ounces of production and provided a guaranteed
floor price of US$1,150 per ounce and exposure to the gold price up to an
average of US$1,290 per ounce. In Q1 2017, the agreements cover 43,000 ounces,
with an average floor price of US$1,150 per ounce and a cap of US$1,421 per
ounce.
During 2016 we assessed the potential to extend the mining of the open pit at
Buzwagi and as a result now expect to continue mining until the end of 2017,
followed by at least two years of processing stockpiles. The design changes
have led to the deepening of the final pit by 35 metres, which adds 2 million
tonnes of ore into the life of mine, amounting to 152,000 ounces of additional
production at negligible additional capital cost. The changes to the design of
the pit include a narrower ramp with increased gradient in the final benches.
The additional ore tonnes have a strip ratio of approximately 2:1 and we
therefore expect total tonnes moved in the second half of the year to be
substantially lower than H1. The additional mine life will lead to an increase
of 35% in production from Buzwagi in 2017, with a 25% reduction in AISC which
will drive significant free cash flow.
North Mara
Key statistics
Three months ended 31 Year ended 31
December December
(Unaudited) 2016 2015 2016 2015
Key operational information:
Ounces produced oz 91,183 77,304 378,443 287,188
Ounces sold oz 92,975 77,505 376,255 288,905
Cash cost per ounce sold1 US$/oz 436 604 410 590
AISC per ounce sold1 US$/oz 850 932 733 915
Open pit:
Tonnes mined Kt 4,182 4,133 15,556 15,110
Ore tonnes mined Kt 702 967 2,752 3,361
Mine grade g/t 2.1 1.9 1.9 2.4
Underground:
Ore tonnes trammed Kt 127 130 440 298
Mine grade g/t 11.0 8.7 15.6 7.1
Processing information:
Ore milled Kt 693 705 2,830 2,833
Head grade g/t 4.4 3.8 4.5 3.6
Mill recovery % 92.1% 89.5% 92.0% 88.2%
Cash cost per tonne milled1 US$/t 59 66 55 60
Capital Expenditure
- Sustaining capital2 US$ 13,739 5,951 28,317 19,678
('000)
- Capitalised development US$ 21,929 11,805 75,609 48,376
('000)
- Expansionary capital US$ 1,475 - 2,399 962
('000)
37,143 17,756 106,325 69,016
- Non-cash reclamation asset US$ 3,319 (21,179) 6,703 (18,909)
adjustments ('000)
Total capital expenditure US$ 40,462 (3,423) 113,028 50,107
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 26 for definitions.
2 Includes land purchases recognised as long term prepayments
Operating performance
Gold production for the full year of 378,443 ounces was 32% higher than in
2015, and a record for the mine. This was a result of 25% higher head grade
driven by the higher contribution from the Gokona underground mine and a
resultant 4% improvement in recoveries. Gold ounces sold for the full year of
376,255 ounces were 30% higher than the prior year and broadly in line with
production
The impact of the higher grade underground ounces combined with an increase in
the open pit mine grade at Nyabirama resulted in a head grade of 4.5g/t, 25% up
from 2015. Gold ounces sold for the year of 376,255 ounces were in line with
production, but 30% higher than the prior year due to the higher production
base.
Cash costs of US$410 per ounce sold were 31% lower than 2015 (US$590), mainly
driven by the higher production base (US$121/oz) and higher capitalisation of
development costs at North Mara due to higher waste stripping at Nyabirama
Stage 4 (US$87/oz), partly offset by increased sales related costs as a result
of higher sales volumes (US$19/oz), higher contracted services (US$14/oz) and
higher maintenance costs ($8/oz).
AISC of US$733 per ounce sold was 20% lower than 2015 (US$915) primarily due to
lower cash costs (US$180/oz) , the impact of increased sales volumes (US$75/oz)
and lower corporate administration expenditure (US$16/oz), partly offset by
higher capitalised development costs (US$72/oz) and higher sustaining capital
expenditure (US$23/oz).
Capital expenditure for the year before reclamation adjustments of US$106.3
million was 54% higher than in 2015 (US$69.0 million). Key capital expenditure
include capitalised stripping costs (US$57.1 million), investment in mobile
equipment and component change-outs (US$20.5 million), capitalised underground
development costs (US$18.5 million), and investment in tailings and
infrastructure (US$5.8 million). In addition, US$4.8 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 in the balance sheet.
Exploration Review
Overall, 2016 was a very successful year for exploration with the key
highlights including our discovery of multiple high-grade mineralised shoots on
the Liranda Corridor in Kenya and the delineation of more than 40
multi-kilometre scale gold anomalies in the Houndé Belt in Burkina Faso and on
the Senegal-Mali Shear Zone in Mali. Additionally, on our brownfield projects
around our mines in Tanzania, we had another successful year identifying
potential underground grade gold mineralisation below the planned final
Nyabirama open pit at North Mara from surface drilling.
Greenfields Projects
West Kenya Joint Venture Projects
An extensive exploration programme was completed in 2016 which including the
drilling of 70 diamond core ("DD") holes (40,600 meters) and 44 reverse
circulation holes ("RC") (4,438 metres). All of the drilling occurred on the
Liranda Corridor Project within the Kakamega Dome Camp focussing on the Acacia
and Bushiangala Prospects.
Kakamega Dome Camp
Diamond core drilling within the Liranda Corridor identified the Bushiangala
and Acacia prospects as having the highest short-term potential to host
significant gold mineralisation within the 12km "Liranda Corridor" based on
high grade results returned from first-pass drilling undertaken in late 2014
within the Kakamega region. The originally budgeted drill programme for 2016
was 50 reverse circulation (RC) and diamond core (DD) holes for approximately
35,000-40,000 metres. Drilling commenced in January but initial drill results
were disappointing with best intercepts of 1m @ 3.46 g/t Au and 1.4m @ 1.47 g/t
Au from the initial holes. Subsequent structural work suggested that the
controls of the high grade may be oblique to the main east-west fabric and may
also dip parallel to the direction of drilling.
As a result of our new understandings the drill programme was modified in
mid-2015 and closer spaced drilling was undertaken around the original
mineralised intersections in LCD0057 (Acacia) and LCD0053 (Bushiangala) in
order to confirm the new interpretation of the orientation of mineralisation.
This strategy paid off with closer spaced drilling at Acacia confirming
steeply dipping east-northeast striking mineralised shears zones with quartz
veinlets, sulphides (pyrite + arsenopyrite +/- pyrrhotite +/- sphalerite +/-
chalcopyrite, molybdenite) and alteration (carbonate +/- sericite +/- vanadium
mica +/-silica). Significant intersections from this drilling included 2.5m @
25g/t, 4m @ 55g/t, 12.8m @ 15.3g/t and 4.3m @ 6.48g/t and also indicated the
potential for multiple mineralised structures on both the Acacia and
Bushiangala shoots.
Subsequent to our new interpretation of the controls on gold mineralisation,
and confirmation from drilling, we commenced an extensive drilling programme
targeting mineralisation from 100 metres to 700 metres vertical depth on the
Acacia shoot and from 100 metres to 400 metres on the Bushiangala shoot. A
total of 70 diamond holes for 40,600 metres were drilled in 2016 targeting
extensions of mineralisation on the Bushiangala and Acacia shoots bringing the
drilling on Liranda Corridor targets since 2014 to 44 RC Holes for 4,438 metres
and 132 DD holes for 64,700 metres. Better results received during H2 2016 from
the Acacia and Bushiangala shoots included 6.8m @ 10.4g/t, 3.5m @ 12.3g/t, 2.2m
@ 126g/t, 3m @ 11.2g/t, 5.9m @ 8.01g/t, 7m @ 17.6g/t, 4m @ 9.99g/t and 1.1m @
35.8g/t.
The diamond core results from the deeper drilling at Acacia are very
encouraging and show the potential for significant down dip/plunge extensions
to mineralised zones. There are potential extensions at the Bushiangala
prospect which remains open both laterally and vertically.
In Q1 2017, we plan to be able to declare an initial Inferred Resource on the
Liranda Corridor of up to 1 million ounces at a grade of around 10 grams per
tonne. We are also continuing to drill step-out holes in order to fully
understand the size of the existing mineralised zones (lateral and depth
extensions) and targeting the expansion of the resource to in excess of 2
million ounces by early 2018. The drilling will also seek to identify further
high-grade structures, improve our understanding of high-grade controls and to
infill gaps between holes in order to increase the confidence of the resource
as we move through the year. We also plan to test further potential shoots
within the Liranda Corridor along strike to the east.
In Q3 2016, Acacia acquired the remaining 49% of the main two tenements from
AfriOre (Lonmin) that form the majority of the West Kenya project for a
consideration of US$5 million.
Lake Zone Camp
No drilling was undertaken however a review of all targets within the Camp was
completed with a focus on identifying the next series of high priority targets
for drill testing. Desktop reviews of existing geological, geochemical and
geophysical data sets were completed and targets ranked. As a result, three
multi-kilometre target corridors have been selected drilling in 2017.
Burkina Faso Projects
South Houndé Joint Venture - 50%
In November 2014, Acacia entered into an earn-in agreement with Sarama
Resources Ltd ("Sarama") whereby Acacia can earn an interest of up to 70% with
the expenditure of US$14 million within four years, on the South Houndé Project
("Project") in Burkina Faso. Acacia may increase its interest in the Project to
75% on satisfaction of certain conditions relating to resource delineation.
During 2016, we continued to explore the Project taking our total spend since
the inception of the JV to in excess of US$7 million and thereby earned a 50%
stake in the Project. We are now progressing to Phase 2 of the Agreement and
have elected to exercise our right to act as Manager of the Project from the
start of 2017.
In February 2016, Sarama declared an increase to the Inferred Resource on the
Tankoro deposit of 600koz, taking the new Inferred Resource to 2.1Moz at 1.5g/t
Au. This was largely based on results from the entire 2015 and early 2016 drill
programmes.
During the year, we completed exploration both within the existing Tankoro
resource area and also on regional targets. A total of 17,229 metres of
aircore, 8,262 metres of RC and 6,838 metres of diamond core drilling were
completed during the year across a number of targets. In addition to this, we
carried out regional auger geochemical drilling, infill soil geochemical
sampling, and pole-dipole gradient array induced polarisation geophysical
surveys to better define regional targets and gold anomalies. Results from
drilling completed during 2016 continue to encourage with better results from
the Tankoro resource area and prospects along the 15km trend including 8m @
3.31g/t, 8m @ 3.97g/t, 5m @ 5.25g/t, 9m @ 3.39g/t,16m @ 3.04g/t, 14m @ 4.12g/t,
15m @ 7.44g/t, 14m @ 2.13g/t, 13.7m @ 5.67g/t,17.4m @ 5.88g/t, 2m @ 9.53g/t,
12m @ 5.78g/t and 10m @ 7.15g/t.
A detailed structural study was undertaken by the JV during the year to assess
the controls on higher grade mineralisation within the resource, and resulted
in the identification of interpreted oblique cross structures associated with
discrete zones containing grades in excess of 5g/t. Diamond core drilling to
test one of these oblique structures returned high grade results from DDH086
(17m @ 5.67g/t Au from 428m), although lower grade intersections were returned
from two further holes drilled at the end of 2016. Drilling is ongoing in
order to evaluate at least four interpreted high grade gold shoots on the MM
and MC Zones at Tankoro in order to initially scope out the upside potential of
these higher grade shoots.
In 2017, the exploration budget for the South Houndé Project is US$4 million,
comprising a programme of 12,000 metres of diamond core drilling, 10,000 metres
of reverse circulation drilling, and 28,000 metres of aircore drilling.
Additionally mapping, pole-dipole gradient array induced polarisation
geophysical surveys and trenching will look to upgrade regional targets into
drill targets. The aim of the Tankoro drilling programme is to add additional
high grade resources on MM and MC Trend resource areas in order to identify
underground economic ounces to significantly impact the Tankoro Resource,
whilst the regional drilling programmes are designed to discover a new
large-scale gold deposit, or at a minimum several satellite ore bodies, capable
of positively impacting the quality, size and economics of the global resources
on the Project.
Pinarello and Konkolikan Projects
In March 2015 Acacia increased its exploration footprint in the Houndé Belt
doing a deal with Canyon Resources on six exploration licences which are
contiguous with other Acacia joint venture properties and comprise the
Pinarello and Konkolikan Projects. Acacia recently earned a 75% interest in
both projects through exploration expenditure of US$1.5 million over the past
two years and is advancing these projects to drill ready status.
During 2016, we continued to undertake infill soil geochemical sampling
programmes designed to better delineate regional gold-in-soil anomalies defined
by wide spaced (1km) sampling programmes. We also acquired and completed
interpretation of ASTER data and a high-resolution radiometric - magnetic
survey. This data is currently being interpreted and integrated with mapping
and soil geochemistry to assist with target generation, ranking and
prioritisation.
Three targets, namely Tankoro Corridor South West Extension, Dopala and Dafala
prospects, were tested with wide-spaced reconnaissance aircore drill traverses
(24,844 metres) during the year. Drill results from the few traverses drilled
at Dopala and Dafala were largely disappointing and initial indications are
that gold-in-soil anomalism is at least partly associated with a plethora of
thin quartz veins within meta-sediments. Drilling results from the Tankoro
Corridor Southern Extension prospect were much more encouraging and will
require follow-up, with highlight results including 2m @ 1.58g/t, 8m @ 0.51g/t,
8m @ 0.59g/t, 4m @ 1.19g/t, 1m @ 4.85g/t, 9m @ 0.85g/t, 12m @ 0.80g/t, 19m @
0.52g/t, 25m @ 0.44g/t, 13m @ 0.89g/t, 8m @ 1.66g/t.
Work programmes during 2017 will consist of further regional aircore drilling
across already delineated litho-structural corridors associated with
gold-in-soil / multi-element geochemical anomalies and several geophysical
targets. The 2017 budget includes in excess of 40,000 metres of AC and 5,000
metres of RC drilling.
Central Houndé JV Project
The Central Houndé JV Project is a joint venture with Thor Explorations Ltd,
and is a grassroots exploration project covering three exploration licences
over an area of 474 square kilometres. Acacia has earned 51% in the property
and can earn up to 80% in the Project through exploration spend of US$2 million
in the next two years and the delivery of a pre-feasibility study.
The Central Houndé and the Konkolikan properties are contiguous with each other
and cover part of a large north-south trending shear zone, the Ouango-Fitiri
Shear Zone (OFSZ), that extends from Ivory Coast in the south to the Houndé
township in the north, more than 200km. Extensive surface gold anomalies up to
5g/t have been identified across the projects from soil sampling, including the
10km long, northeast-trending, Legue-Bongui "corridor" in the southeast of the
Central Houndé JV project.
During the year we completed infill soil sampling and followed this up with a
gradient array induced polarization survey and completed 7,506 metres of RC and
3,156 metres of diamond core. Soil geochemical sampling surveys defined a very
large gold anomaly (Legue-Bongui Corridor) extending over 10km north-south and
3km east-west, with assay results up to 5,000ppb Au. Initial RC and diamond
core drilling has only focused on a small portion of the central Legue-Bongui
Corridor with encouraging results including 5m @ 3.94g/t, 2m @ 84.8g/t, 6m @
3.74g/t, 12m @ 1.40g/t,19m @ 1.02g/t, 11m @ 1.49g/t, , 7m @ 1.87g/t, 2m @ 28.2g
/t, t, 5m @ 1.51g/t, 18m @ 0.60g/t, 25m @ 1.03g/t, and 11m @ 0.40g/t. These
results can be considered very encouraging as we are seeing both broad lower
grade gold mineralised zones associated with extensive zones of alteration as
well as vein-controlled high-grade zones up to 84g/t. Gold anomalism has now
been intersected in each fence of RC drilling (multiple holes per fence - 200
metres apart) striking in a north-north-west direction over a distance of
1.4km.
Work programmes during 2017 will continue testing the plethora of existing
surface geochemical targets, and the extensions of already identified
mineralisation, and will include at least 10,000 metres of RC and diamond core
drilling.
Frontier JV Project
In June 2016, Acacia entered into an agreement with a local Burkinabe company,
Metalor SA, the "Frontier Joint Venture", which includes two licences
immediately south of, and contiguous to, the Pinarello JV Project where soil
sampling has identified multiple kilometre scale gold-in-soil anomalies. This
JV added a further 500 square kilometres to Acacia's land package on the Houndé
Belt, increasing the overall project area to approximately 2,700 square
kilometres. The JV allows Acacia to earn 100% of the project through certain
staged option payments totalling US$300,000 over 30 months. Metalor will hold a
1% NSR on production from the project should Acacia identify and exploit an
economic gold deposit, and Acacia has the right to acquire the NSR from Metalor
for US$1 million at any future point in time.
Historic reconnaissance soil sampling has already identified gold anomalism on
the Frontier JV properties associated with interpreted regional shear zones
along the contacts between granite intrusions and volcano-sedimentary
lithologies. During 2016 we have completed acquisition and interpretation of
ASTER and high-resolution airborne radiometric and magnetic data. We have also
commenced geological and regolith mapping and have embarked on a reconnaissance
surface geochemical sampling program. A total of 1,765 surface samples were
collected during the period post wet season to end of year.
Work during 2017 will consist of mapping, regional and infill geochemical
sampling surveys, auger drilling, pitting and trenching, as well as
approximately 10,000 metres of aircore drilling.
Mali
Tintinba Project
In June 2015, Acacia began exploring in Mali when it acquired interests in the
Tintinba project by entering into an earn-in agreement with a local partner.
The project comprises three exploration licences covering over 150 square
kilometres within the Keneiba-Kedougou Window and along the world class
Senegal-Mali Shear Zone.
Initial soil sampling programmes defined eight large multi-kilometre scale gold
anomalies across the three permits. These gold anomalies are interpreted to be
associated with second-order, northwest and northeast oriented, splay
structures within the highly prospective Senegal-Mali Shear Zone (a several
kilometre wide structural domain).
We have completed infill soil sampling and mapping prospective geology,
structure, alteration and veining, and a number of the targets have associated
artisanal workings. During the year we have completed a total of 6,994 meters
of RC drilling. Drilling comprised wide spaced fences on four of the anomalies
- namely Tribala, Zadi, Bounbou and Baga. Results as expected for this type of
broad reconnaissance work are mixed, however we are encouraged by results from
in particular the Tribala and Zadi prospects. A gradient array induced
polarisation survey commenced late 2016 and is expected to be complete by early
February 2017. Better results from the initial RC drilling include 19m @ 0.55g/
t, 17m @ 0.71g/t, 13m @ 0.50g/t, 25m @ 0.45g/t, 7m @ 1.01g/t, 23m @ 0.30g/t,
10m @ 0.35g/t, 28m @ 0.31g/t , and 13m @ 1.11g/t.
Work during 2017 will comprise additional gradient array induced polarization
surveys, mapping and at least 10,000 metres of RC drilling to test existing and
new targets.
Tanzania
Nyanzaga Project
In September 2015, Acacia entered into an earn-in joint venture with OreCorp
Limited (ASX: ORR) to progress the Nyanzaga Project, whereby OreCorp took over
management of the project for a three year period. This structure allows the
project to be progressed whilst giving Acacia the optionality to maintain a 75%
stake in the project once it gets to a development decision. OreCorp have
continued to progress the project and during the quarter released the positive
results of a scoping study which outlined a combined open pit and underground
project that produces 2.4 million ounces of gold over a 13 year life at an
AISC of US$798/oz and requires pre-production capital of US$248 million
(inclusive of contingency). The full study can be found on OreCorp's website,
www.orecorp.com.au. Due to the positive results in the scoping study, OreCorp
are undertaking a pre-feasibility study into the project which is expected to
be complete in H1 2017.
Brownfield Projects
In 2016, brownfield exploration was focused on the Nyabirama ore body at North
Mara where surface diamond core drilling targeted extensions to the high grade
mineralised system below the planned final pit. The surface drilling
demonstrated the potential for further resource potential up to 700 metres
below the final Stage 4 pit. Underground drilling also continued on the Reef 2
series at Bulyanhulu with mixed results to date.
North Mara
Nyabirama
During late 2016 we completed a drilling programme of 14 holes for 9,940 metres
of surface diamond core drilling adjacent to the Nyabirama pit primarily
designed to test the underground potential beneath the final Stage 4 pit. The
drilling was designed to test the interpreted down-dip and plunge extensions of
high grade quartz-vein lode structures, and the use of core drilling was
designed to help with an enhanced structural understanding of the geological
model and controls on high grade.
Seven of the first ten holes returned one or more high-grade intersections
confirming the opportunity for underground mineable resources to at least 400m
beneath the open pit. The better results from the first 10 holes included:
- NBD01437 2.2m @ 19.8 g/t Au from 645.8m
- NBD0141 6m @ 14.7 g/t Au from 265.5m,
6m @ 7.39 g/t Au from 387m
7m @ 197 g/t Au from 361m incl. 1.3m @ 870g/t Au,
- NBD0142 4m @ 19.1 g/t Au from 345m,
9m @ 15.3 g/t Au from 370m
1m @ 150 g/t Au from 396m,
3m @ 9.21 g/t Au from 462m
- NBD0143 5.5m @ 11.8 g/t Au from 223m,
2m @ 11.8 g/t Au from 283m
- NBD0144 15m @ 15.9 g/t Au from 347m incl. 1m @ 200 g/t from
347m
- NBD0145 1m @ 17 g/t Au from 522m
- NBD0146 7m @ 50.2 g/t Au from 533m incl. 1m @ 320 g/t Au from
536m
The results of the drilling are considered very encouraging and have led to the
design of a further 10 hole programme to further extend the identified
mineralisation to a depth of 700m; this programme has already commenced and
consists of approximately 8,000 metres of diamond core drilling. It will cost
approximately US$2 million to drill and should be completed in Q1 2017.
We have also budgeted a further 25,000 metres of resource definition drilling
for 2017-2018 for approximately US$5 million, of which we expect to drill
approximately 15,000 metres in 2017. If the results of these programmes are
successful, they will be incorporated into a desktop study designed to assess
the best option of providing underground drill access points in 2018 to further
test the system with the goal of commencing underground mining operations
before the completion of the open pit in 2021.
Gokona Underground
Exploration activity during 2016 at Gokona Underground was limited to desktop
work whilst the mine updated the current geological model and installed
drilling platforms to support the 2017 and 2018 planned programmes. These
programmes have been designed to test the lateral extensions of the ore body
and to infill the known mineralisation at depth. The 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. The aim of these programmes
is to be able to increase underground life of mine to at least 10 years.
Bulyanhulu
We undertook three drill programmes in Reef 2 at Bulyanhulu in 2016 for 37,375
metres, primarily focused on enhancing our understanding of the existing Reef 2
system. The first two programmes were designed to infill existing resources in
the Upper East Zone and the Central Zone on Reef 2 to test whether the current
drill spacing across the Reef 2 series is appropriate. The Reef 2 Upper East
Zone was an area removed from the mine plan late in 2015 following poor results
from infill drilling, and negative results from an economic re-evaluation
during the reserves process. The Reef 2 Central Zone is an area that is near
existing infrastructure and had the potential to be brought into the mine plan
earlier than previously planned. The 2016 preliminary results from Central Zone
have increased confidence and early indications are showing potential for a
modest increase in resource ounces, counter balancing the previous losses from
Reef 2 Upper East area. As a result, Reef 2 Central has now been brought
forward in the new mine plan.
As a result of the closer spaced drilling, variography has shown that the
continuity of thickness and grade is less than previously thought for the Reef
2 series. The previous 100 metre search radius is no longer considered
appropriate and has been reduced to 50 metres for indicated resource
classification. This has meant that some ounces previously classified as
Probable Reserve (based on the underlying indicated resource) have now largely
been moved to inferred resource. We are undertaking drilling programmes during
2017, primarily in the Central Zone on Reef 2, to reduce the drill spacing in
order to upgrade the current resource there and will continue a programme of
infilling the Reef 2 series in available areas over the coming years.
The third programme of drilling in the Western step out area continued to
intersect high grade mineralisation on Reefs 2M and 2I however generally widths
have been narrower than the Eastern part of the system. The current resource
extension drill programme will be completed in early 2017 and results, together
with future access requirements which are currently constraining drilling, will
be incorporated into future planned resource extension programmes.
Financial Review
Continued cost discipline in combination with an increased gold price in 2016
is reflected in the strong cash generation, with net cash increasing by
US$112.9 million to US$218.5 million as at 31 December 2016. At the same time,
reported earnings increased significantly, but were impacted by an increase in
tax provisions of US$69.9 million recorded in Q1 2016 relating to court rulings
regarding prior year tax assessments. This is reflected in the Acacia Group's
financial results for the year ended 31 December 2016:
· Revenue of US$1,053.5 million was US$185.4 million higher than 2015
driven by the 13% higher sales volumes.
· Cash costs decreased to US$640 per ounce sold from US$772 per ounce sold
in 2015, driven by the higher production base, higher capitalisation of
development costs, lower labour costs and lower energy and fuel costs, partly
offset by higher sales related costs and increased contracted services costs.
· AISC at US$958 per ounce sold was 14% lower than in 2015 (US$1,112 per
ounce sold), mainly due to lower cash costs and the higher production base.
· EBITDA increased by 137% to US$415.4 million, mainly driven by the
higher sales volumes, a higher gold price and lower corporate administration
costs.
· Higher tax expense of US$147.1 million compared to the prior year
expense of US$73.0 million, driven by an increase in current corporate tax as a
result of North Mara's increased profitability (US$54.5 million), adjustments
in respect of provisions for uncertain tax positions relating to prior years
for North Mara and Tulawaka (US$36.7 million) and deferred tax of US$55.9
million driven by provisions for uncertain tax positions for Bulyanhulu
(US$35.0 million) and movements in temporary differences (US$20.9 million).
· As a result of the above, we achieved a profit of US$94.9 million,
compared to a loss of US$197.1 million in 2015.
· Adjusted net earnings of US$161.0 million were US$167.3 million higher
than 2015. Adjusted earnings per share amounted to US39.2 cents, up from US1.7
cents in 2015.
· Operational cash flow of US$318.0 million doubled from 2015, primarily
as a result of higher gold sales volumes and prices driving higher revenue,
partly offset by unfavourable working capital outflows due to share based
payments, an increase in accounts receivable, and payments of US$40.9 million
relating to prepaid and provisional corporate tax relating to North Mara.
The following review provides a detailed analysis of our consolidated results
for 12 months ended 31 December 2016 and the main factors affecting financial
performance. It should be read in conjunction with the unaudited consolidated
financial information and accompanying notes on pages 31 to 56, which have been
prepared in accordance with International Financial Reporting Standards as
adopted for use in the European Union ("IFRS").
Revenue
Revenue for 2016 of US$1,053.5 million was US$185.4 million higher than 2015
due to a 13% increase in gold sales volumes (95,540 ounces) combined with a 7%
increase in the average net realised gold price from US$1,154 per ounce sold in
2015 to US$1,240 in 2016.
The net realised gold price for the year of $1,240/oz was $11/oz lower than the
average market price of $1,251/oz due to the timing of sales. Realised losses
on Buzwagi related gold hedges was US$1.8 million for the year, an impact of
US$2 per ounce sold.
Included in total revenue is co-product revenue of US$39.1 million for 2016,
10% higher than the prior year period (US$35.7 million). The 2016 average
realised copper price of US$2.21 per pound compared unfavourably to that of
2015 (US$2.33 per pound), and was driven by the lower market price for copper.
This was offset by an 11% increase in copper sales volumes mainly from Buzwagi.
Cost of sales
Cost of sales was US$727.1 million for 2016, representing a decrease of 1% on
the prior year period (US$734.1 million). The key aspects impacting the cost of
sales for the year include an 8% reduction in direct mining costs, partly
offset by higher depreciation and amortisation costs as a result of the higher
production base and higher sales related costs as a result of higher sales
volumes.
The table below provides a breakdown of cost of sales:
Three months ended 31 Year ended 31
(US$'000) December December
(Unaudited) 2016 2015 2016 2015
Cost of Sales
Direct mining costs 132,937 132,385 479,022 520,943
Third party smelting and refining 6,360 6,716 25,588 21,110
fees
Realised losses on economic hedges 1,004 4,340 9,619 12,358
Realised losses on gold hedges 487 - 1,818 -
Royalty expense 11,808 10,069 47,237 38,058
Depreciation and amortisation* 43,718 43,364 163,796 141,697
Total 196,314 196,874 727,080 734,167
*Depreciation and amortisation includes the depreciation component of the cost
of inventory sold of US$2.6 million (2015 US$3.5 million).
A detailed breakdown of direct mining expenses is shown in the table below:
Three months ended 31 Year ended 31
(US$'000) December December
(Unaudited) 2016 2015 2016 2015
Direct mining costs
Labour 24,006 26,200 90,013 108,786
Energy and fuel 24,082 23,463 89,757 100,453
Consumables 26,248 27,536 105,152 108,324
Maintenance 30,807 23,679 111,451 106,963
Contracted services 37,226 32,240 133,734 124,088
General administration costs 23,540 24,873 86,761 90,290
Gross direct mining costs 165,909 157,991 616,868 638,904
Capitalised mining costs (32,973) (25,606) (137,846) (117,961)
Total direct mining costs 132,936 132,385 479,022 520,943
Gross direct mining costs of US$616.9 million for 2016 were 3% lower than 2015
(US$638.9 million). The overall reduction was driven by the following:
· A 17% reduction in labour costs, mainly as a result of a 28% reduction
in international employees and a 21% reduction in national employees across
sites, driven by localisation efforts and restructuring, combined with savings
associated with local labour costs given the devaluation of the Tanzanian
shilling to the dollar.
· An 11% reduction in energy and fuel expenses across all sites due to
lower global fuel prices, lower consumption and the impact of a favourable
exchange rate on locally purchased power as well as increased reliance on the
national electricity grid resulting in lower self-generation.
· A 3% decrease in consumables costs mainly at Buzwagi due to lower
reagents and chemicals costs as a result of lower cyanide usage, lower grinding
media costs driven by the optimised usage of grinding balls, lower explosives
costs driven by improved blasting practice and the overall impact of lower
negotiated prices on key consumables.
· A 4% decrease in general administration costs mainly at Buzwagi as a
result of lower warehousing and logistics expenditure.
This was offset by:
· An 8% increase in contracted services mainly as a result of increased
underground mining activity at North Mara as a result of the ramp up in
underground production, combined with increased maintenance contractor charges
at Buzwagi.
· A 4% increase in maintenance costs mainly at Buzwagi and North Mara
driven by higher maintenance supplies as a result of major component change
outs and increased equipment breakdowns.
Capitalised direct mining costs, consisting of capitalised development costs
and investment in inventory is made up as follows:
Three months ended 31 Year ended 31
(US$'000) December December
(Unaudited) 2016 2015 2016 2015
Capitalised direct mining
costs
Capitalised development (33,704) (20,766) (119,905) (88,218)
costs
Drawdown of/ (investment in) 731 (4,840) (17,941) (29,743)
inventory
Total capitalised direct (32,973) (25,606) (137,846) (117,961)
mining costs
Capitalised development costs were 36% higher than 2015, mainly driven by
increased capitalised waste stripping costs related to the Nyabirama pit at
North Mara. The investment in inventory was US$17.9 million, 40% lower than in
2015 due to an increased proportion of costs allocated to cost of sales due to
an overall lower average cost valuation given lower operating costs, partially
offset by an increased build-up of ore stockpiles at Buzwagi.
Central costs
Total central costs amounted to US$51.8 million for 2016, a 30% increase on
2015 (US$40.0 million) mainly driven by an increased share-based payment
expense as a result of the stronger share price performance compared to 2015,
specifically when compared to our peers and the global mining index, impacting
on the valuation of future share-based payment liabilities to employees.
Acacia's share price increased by 108% compared to 2015. This was partly offset
by 36% lower corporate administration costs as a result of the corporate office
restructuring and cost saving initiatives mainly around personnel cost,
consulting fees and professional services and overall lower general
administration costs.
Three months ended 31 Year ended 31
(US$'000) December December
(Unaudited) 2016 2015 2016 2015
Corporate administration 6,219 7,308 21,895 34,455
Share-based payments (9,795) (284) 29,929 5,537
Total central costs (3,576) 7,024 51,824 39,992
Exploration and evaluation costs
Exploration and evaluation costs of US$24.0 million were incurred in 2016, 22%
higher than the US$19.8 million spent in 2015. The key focus areas for the
period were greenfield exploration programmes in West Kenya amounting to
US$10.6 million, greenfield exploration programmes in West Africa amounting to
US$7.5 million and brownfield exploration at Bulyanhulu of US$3.5 million.
Corporate social responsibility expenses
Corporate social responsibility costs incurred for 2016 amounted to US$10.7
million compared to the prior year of US$12.9 million. Corporate social
responsibility overheads and central initiatives in 2016 amounted to US$4.5
million and was lower compared to US$5.3 million in 2015. General community
projects funded from the Acacia Maendeleo Fund amounted to US$6.1 million,
which was US$1.4 million lower than in 2015.
Other income
Other income in 2016 amounted to US$11.6 million, compared to an expense of
US$28.1 million in 2015. The main contributors include Acacia's ongoing
programme of zero cost collar contracts to mitigate the negative impact of
copper, rand and fuel market volatility, in combination with zero cost collars
relating to Buzwagi gold production, which resulted in a combined
mark-to-market revaluation gain of US$13.0 million (as these arrangements do
not qualify for hedge accounting these unrealised gains are recorded through
profit and loss) and a reversal of indirect tax discounting provisions of
US$9.7 million as a result of increased profitability which positively impacted
the recoverability of the MOS indirect tax receivable. The income was partly
offset by (i) retrenchment costs of US$6.9 million, (ii) legal costs of US$2.6
million and (iii) disallowed indirect taxes of US$1.5 million and (iv) other
costs of US$ 4.8 million.
Finance expense and income
Finance expense of US$11.0 million for 2016 was 12% lower than in 2015 (US$12.6
million). The key components were borrowing costs relating to the Bulyanhulu
CIL facility (US$4.6 million) which were lower than the prior year due to a
lower outstanding facility following the repayments, lower accretion expenses
of US$2.3 million relating to the discounting of the environmental reclamation
liability and US$2.1 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 9 of the
condensed financial information for details.
Taxation matters
The total income tax charge was of US$147.1 million compared to the prior year
expense of US$73.0 million. The current tax charge of US$91.2 million (2015:
zero) was made up of current year income tax for North Mara, driven by year to
date profitability, of US$54.5 million and provisions for uncertain tax
positions in respect of prior years raised for North Mara (US$30.4 million) and
Tulawaka (US$4.4 million) as a result of adverse tax rulings in Q1 2016. The
deferred tax charges of US$55.9 million (2015: US$73.0 million) reflects
provisions for uncertain tax positions raised in Q1 2016 for Bulyanhulu
(US$35.0 million) and movements in temporary differences of US$20.9 million.
The effective tax rate in 2016 amounted to 61% compared to 59% in 2015.
Net earnings and earnings per share
As a result of the factors discussed above, net earnings for 2016 were US$94.9
million, against the prior year loss of US$197.1 million.
Earnings per share for 2016 amounted to US23.2 cents, an increase of US71.3
cents from the prior year loss per share of US48.1 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 of for the year was US$161.0 million compared to US$6.8
million in 2015. Net earnings in the year 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 28 for reconciliation between net profit and
adjusted net earnings.
Adjusted earnings per share for 2016 amounted to US39.2 cents, an increase of
US37.5 cents from the prior year adjusted earnings per share of US1.7 cents.
Financial position
Acacia had cash and cash equivalents on hand of US$317.8 million as at 31
December 2016 (US$233.3 million as at 31 December 2015). 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 2016, the 2nd and 3rd
repayments amounting to US$28.4 million in total were made. At 31 December
2016, the outstanding capital balance is US$99.4 million (31 December 2015:
US$127.8 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$1.39
billion as at 31 December 2015 to US$1.44 billion as at 31 December 2016. The
main capital expenditure drivers have been explained above, and have been
offset by depreciation charges of US$163.8 million. Refer to note 13 to the
condensed financial information for further details.
Total indirect tax receivables increased from US$110.2 million as at 31
December 2015 to US$136.4 million as at 31 December 2016. The increase was
mainly due to a significant delay in VAT refunds in 2016 as a result of ongoing
audits by the Tanzanian Revenue Authority on submitted VAT returns and a
reduction in the discounting provision for MOS indirect tax receivables of
US$9.7 million. Our gross increase in receivables, before the corporate tax
prepayment offset, amounted to US$64.8 million. This was partly offset by
corporate tax prepayments of US$20.0 million and provisional tax payments of
US$20.9 million with the net increase in receivables being US$26.2 million.
The net deferred tax position increased from a liability of US$84.0 million as
at 31 December 2015 to a liability of US$140.0 million as at 31 December 2016.
This was mainly as a result of the tax provisions raised in Q1 2016 as
discussed above which utilised some of the carry forward losses and movements
in temporary differences.
Net assets increased from US$1.79 billion as at 31 December 2015 to US$1.85
billion as at 31 December 2016. The increase reflects the current year income
of US$95.0 million, the payment of the final 2015 dividend of US$11.5 million
and the payment of the 2016 interim dividend of US$8.1 million.
Cash flow generation and capital management
Cash flow
(US$000) Three months ended 31 December Year ended 31
December
(Unaudited) 2016 2015 2016 2015
Cash generated from operating 60,933 45,110 317,976 156,465
activities
Cash used in investing (45,107) (37,964) (185,163) (181,436)
activities
Cash (used in)/ provided by - - (48,032) (32,270)
financing activities
Increase(decrease) in cash 15,826 7,146 84,781 (57,241)
Foreign exchange difference on (96) (251) (258) (3,341)
cash
Opening cash balance 302,061 226,373 233,268 293,850
Closing cash balance 317,791 233,268 317,791 233,268
Cash flow from operating activities was US$318.0 million for 2016, an increase
of US$161.5 million from 2015 (US$156.5 million). The increase relates to a
higher operating profit due to higher gold sales volumes and lower operating
costs, partly offset by unfavourable working capital outflows of US$17.6
million compared to outflows of US$4.8 million in 2015 and the impact of higher
non-cash expenses of US$23.9 which include unrealised gains on derivatives of
US$13.0 million and discounting of indirect taxes of US$9.7 million. This was
further offset by provisional income tax paid of US$20.9 million, and a US$20.0
million prepayment of corporate tax as agreed with the Tanzanian Government.
The working capital outflow relates to cash share based payments of US$36.0
million offset by non-cash revaluation charges of future share based payments
of US$29.9 million, a net increase in indirect tax receivables on a cash basis
of US$17.5 million, a net increase in inventories on hand of US$8.3 million due
to the higher production base and timing of sales, which was offset by an
increase in payables of US$15.9 million due to the timing of payments.
Cash flow used in investing activities was US$185.2 million for 2016, an
increase of 2% when compared to 2015 (US$181.4 million), driven by higher
capitalised development mainly at North Mara, partly offset by lower sustaining
capital expenditure at Bulyanhulu and Buzwagi.
A breakdown of total capital and other investing capital activities for 2016 is
provided below:
(US$'000) Year ended 31 December
(Unaudited) 2016 2015
Sustaining capital (51,291) (83,331)
Capitalised development (138,691) (109,686)
Expansionary capital (3,660) (5)
Total cash capital (193,643) (193,022)
Non-current asset movement1 8,480 11,586
Cash used in investing activities (185,163) (181,436)
Capital expenditure reconciliation:
Total cash capital 193,643 193,022
Land purchases 4,759 6,449
Movement in capital accruals (2,504) (15,854)
Capital expenditure 195,898 183,617
Land purchases classified as long term (4,759) (6,449)
prepayments
Non-cash rehabilitation asset 21,955 (31,936)
adjustment
Total capital expenditure per segment 213,094 145,232
note
1 Non-current asset movements relates to the movement in Tanzania government
receivables and other long term assets.
Sustaining capital
Sustaining capital expenditure includes investments in tailings and
infrastructure (US$16.8 million), investment in mobile equipment and component
change-outs (US$31.3 million), investment in the Bulyanhulu winder upgrade
(US$2.0 million) and other sustaining capital expenditure across sites of
US$5.4 million. During the year, capital accruals from December 2015 of US$2.5
million were paid.
Capitalised development
Capitalised development includes North Mara capitalised stripping costs
(US$57.1 million) and capitalised underground development (US$18.5 million) and
Bulyanhulu capitalised underground development costs (US$63.1 million)
Expansionary capital
Expansionary capital expenditure consisted mainly of capitalised expansion
drilling at North Mara (US$2.4 million) and Bulyanhulu (US$1.3 million).
Non-cash capital
Non-cash capital was US$19.5 million and consisted mainly of reclamation asset
adjustments (US$22.0 million) and a decrease in capital accruals (US$2.5
million). The reclamation adjustments were driven by changes in US risk free
rates driving lower discount rates and increased closure costs assumptions.
Other investing capital
During 2016 North Mara incurred land purchases totalling US$4.8 million (2015:
US$6.4 million).
Cash flow used in financing activities for 2016 of US$48.0 million, an increase
of US$15.7 million from US$32.3 million in 2015. The outflow relates to payment
of the final 2015 dividend of US$11.5 million, the 2016 interim dividend of
US$8.1 and the payment of the 2nd and 3rd instalments of the borrowings related
to the Bulyanhulu CIL facility totalling US$28.4 million.
Dividend
The final 2015 dividend of US2.8 cents per share was paid to shareholders on 27
May 2016 and the interim dividend of US2.0 cents per share was paid to
shareholders on 25 September 2015. The Board of Directors have recommended a
final dividend for 2016 of US8.4 cents per share, payable to shareholders in
May 2016.
Significant judgements in applying accounting policies and key sources of
estimation uncertainty
Many of the amounts included in the condensed consolidated financial
information require management to make judgements and/or estimates. These
judgements and estimates are continuously evaluated and are based on
management's experience and best knowledge of the relevant facts and
circumstances, but actual results may differ from the amounts included in the
condensed consolidated financial information included in this release.
Information about such judgements and estimation is included in the accounting
policies and/or notes to the consolidated financial statements, and the key
areas are summarised below.
Areas of judgement and key sources of estimation uncertainty that have the most
significant effect on the amounts recognised in the condensed consolidated
financial statements include:
· Estimates of the quantities of proven and probable gold and copper
reserves;
· Estimates included within the life-of-mine planning such as the timing
and viability of processing of long term stockpiles;
· The capitalisation of production stripping costs;
· The capitalisation of exploration and evaluation expenditures;
· Review of goodwill, tangible and intangible assets' carrying value, the
determination of whether a trigger for an impairment review exist, whether
these assets are impaired and the measurement of impairment charges or
reversals, and also includes the judgement of reversal of any previously
recorded impairment charges;
· The estimated fair values of cash generating units for impairment tests,
including estimates of future costs to produce proven and probable reserves,
future commodity prices, foreign exchange rates and discount rates;
· The estimated useful lives of tangible and long-lived assets and the
measurement of depreciation expense;
· Recognition of a provision for environmental rehabilitation and the
estimation of the rehabilitation costs and timing of expenditure;
· Whether to recognise a liability for loss contingencies and the amount
of any such provision;
· Whether to recognise a provision for accounts receivable, and in
particular the indirect tax receivables from the Tanzanian Government, a
provision for obsolescence on consumables inventory and the impact of
discounting the non-current element of the indirect tax receivable;
· Recognition of deferred income tax assets, amounts recorded for
uncertain tax positions, the measurement of income tax expense and indirect
taxes;
· Determination of the cost incurred in the productive process of ore
stockpiles, gold in process, gold doré/bullion and concentrate, as well as the
associated net realisable value and the split between the long term and short
term portions;
· Determination of fair value of derivative instruments; and
· Determination of fair value of share options and cash-settled
share-based payments.
Non-IFRS Measures
Acacia has identified certain measures in this report that are not measures
defined under IFRS. Non-IFRS financial measures disclosed by management are
provided as additional information to investors in order to provide them with
an alternative method for assessing Acacia's financial condition and operating
results, and reflects more relevant measures for the industry in which Acacia
operates. These measures are not in accordance with, or a substitute for, IFRS,
and may be different from or inconsistent with non-IFRS financial measures used
by other companies. These measures are explained further below.
Net average realised gold price per ounce sold is a non-IFRS financial measure
which excludes from gold revenue:
- Unrealised gains and losses on non-hedge derivative contracts; and
- Export duties
It also includes realised gains and losses on gold hedge contracts reported as
part of cost of sales.
Net average realised gold price per ounce sold have been calculated as follow:
(US$000) Three months ended 31 Year ended 31
December December
(Unaudited) 2016 2015 2016 2015
Gold revenue 253,957 219,839 1,014,468 832,462
Less: Realised gold hedge losses (487) - (1,818) -
Net gold revenue 253,470 219,839 1,012,651 832,462
Gold sold (ounces) 209,292 198,617 816,743 721,203
Net average realised gold price 1,211 1,107 1,240 1,154
(US$/ounce)
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.
Three months ended 31 Year ended 31
(US$'000) December December
(Unaudited) 2016 2015 2016 2015
Total cost of sales 196,314 196,874 727,080 734,167
Deduct: depreciation and (43,718) (43,364) (163,796) (141,697)
amortisation*
Deduct: realised losses on (487) - (1,818) -
gold hedges
Deduct: Co-product revenue (9,932) (8,829) (39,063) (35,669)
Total cash cost 142,177 144,681 522,403 556,801
Total ounces sold 209,292 198,617 816,743 721,203
Total cash cost per ounce 679 728 640 772
sold
* Depreciation and amortisation includes the depreciation component of the cost
of inventory sold
All-in sustaining cost (AISC) is a non-IFRS financial measure. The measure is
in accordance with the World Gold Council's guidance issued in June 2013. It is
calculated by taking cash cost per ounce sold and adding corporate
administration costs, share-based payments, reclamation and remediation costs
for operating mines, corporate social responsibility expenses, mine exploration
and study costs, realised gains and/or losses on operating hedges, capitalised
stripping and underground development costs and sustaining capital expenditure.
This is then divided by the total ounces sold. A reconciliation between cash
cost per ounce sold and AISC for the key business segments is presented below:
(Unaudited) Three months ended 31 December 2016 Three months ended 31 December 2015
(US$/oz sold) Bulyanhulu North Buzwagi Group* Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per 784 436 1,035 679 653 604 1,101 728
ounce sold
Corporate 17 17 25 30 58 58 63 37
administration
Share based (21) (14) (20) (47) 0 (1) (1) (1)
payments
Rehabilitation 8 9 2 7 4 16 3 9
CSR expenses 7 19 7 15 9 26 4 17
Capitalised 214 236 - 181 146 152 - 118
development
Sustaining capital 52 147 7 87 129 77 66 96
Total AISC 1,061 850 1,056 952 999 932 1,236 1,004
* The group total includes a credit of US$14/oz of unallocated corporate
related costs in Q4 2016, and a cost of US$18/oz in Q4 2015.
(Unaudited) Year ended 31 December 2016 Year ended 31 December 2015
(US$/oz sold) Bulyanhulu North Buzwagi Group* Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per ounce 722 410 1,031 640 797 590 1,046 772
sold
Corporate 21 21 26 27 52 48 50 48
administration
Share based payments 2 2 3 37 2 0 (0) 8
Rehabilitation 7 9 3 7 6 22 6 12
CSR expenses 6 15 10 13 11 19 11 18
Capitalised 226 201 0 170 225 167 9 152
development
Sustaining capital 74 75 22 64 160 69 65 102
Total AISC 1,058 733 1,095 958 1,253 915 1,187 1,112
* The group total includes US$43/oz of unallocated corporate related costs in
2016, and a cost of US$10/oz in 2015.
AISC is intended to provide additional information on the total sustaining cost
for each ounce sold, taking into account expenditure incurred in addition to
direct mining costs and selling costs.
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, co-product credits,
and production taxes, and exclude capitalised production stripping costs,
inventory purchase accounting adjustments, unrealised gains/losses from
non-hedge currency and commodity contracts, depreciation and amortisation and
corporate social responsibility charges. Cash cost is calculated net of
co-product revenue. Cash cost per tonne milled is calculated by dividing the
aggregate of these costs by total tonnes milled.
EBITDA is a non-IFRS financial measure. Acacia calculates EBITDA as net profit
or loss for the period excluding:
- Income tax expense;
- Finance expense;
- Finance income;
- Depreciation and amortisation; and
- Impairment charges of goodwill and other long-lived assets.
EBITDA is intended to provide additional information to investors and analysts.
It does not have any standardised meaning prescribed by IFRS and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS. EBITDA excludes the impact of cash costs of financing
activities and taxes, and the effects of changes in operating working capital
balances, and therefore is not necessarily indicative of operating profit or
cash flow from operations as determined under IFRS. Other companies may
calculate EBITDA differently.
A reconciliation between net profit for the period and EBITDA is presented
below:
(US$000) Three months ended 31 Year ended 31 December
December
(Unaudited) 2016 2015 2016 2015
Net profit/ (loss) for the period 48,285 (198,860) 94,944 (197,148)
Plus income tax expense/(credit) 11,399 64,295 147,113 72,988
Plus depreciation and amortisation 43,718 43,364 163,796 141,697
Plus: impairment charges/ - 146,201 - 146,201
write-offs
Plus finance expense 2,644 2,888 11,047 12,617
Less finance income (365) (258) (1,512) (1,384)
EBITDA 105,681 57,630 415,388 174,971
*Depreciation and amortisation includes the depreciation component of the cost
of inventory sold.
Adjusted EBITDA is a non-IFRS financial measure. It is calculated by excluding
one-off costs or credits relating to non-routine transactions from EBITDA. It
excludes other credits and charges that, individually or in aggregate, if of a
similar type, are of a nature or size that requires explanation in order to
provide additional insight into the underlying business performance. EBITDA is
adjusted for items (a) to (e) as contained in the reconciliation to adjusted
net earnings below.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for
depreciation and amortisation and goodwill impairment charges.
Adjusted net earnings is a non-IFRS financial measure. It is calculated by
excluding certain costs or credits relating to non-routine transactions from
net profit attributed to owners of the parent. It includes other credit and
charges that, individually or in aggregate, if of a similar type, are of a
nature or size that requires explanation in order to provide additional insight
into the underlying business performance.
Adjusted net earnings and adjusted earnings per share have been calculated as
follows:
(US$000) Three months ended 31 Year ended 31 December
December
(Unaudited) 2016 2015 2016 2015
Net earnings/(loss) 48,285 (198,860) 94,944 (197,148)
Adjusted for:
Impairment charges (a) - 146,201 - 146,201
Restructuring cost (b) 3,995 8,384 7,689 9,864
One off legal settlements/ (3,455) 4,371 (3,455) 7,300
recoveries (c)
Discounting of indirect taxes (d) (3,211) (5,906) (9,719) (5,906)
Reversal of contingent liability - (5,313) - (5,313)
(e)
Prior year tax positions - 12,740 69,916 12,740
recognised 1
Tax impact of the above 801 40,423 1,646 39,100
Adjusted net earnings 46,415 2,040 161,021 6,838
1 For the year ended 31 December 2016, US$69.9 million represents a provision
raised for the implied impact of an adverse tax ruling made by the Tanzanian
Court of Appeal with respect to historical tax assessments of Bulyanhulu. As
reported in Q1 2016, the impact of the ruling was calculated for Bulyanhulu and
extrapolated to North Mara and Tulawaka as well and covers results up to the
end of 2015. On a site basis, US$35.1 million was raised for Bulyanhulu,
US$30.4 million for North Mara and US$4.4 million for Tulawaka.
Adjusted net earnings per share is a non-IFRS financial measure and is
calculated by dividing adjusted net earnings by the weighted average number of
Ordinary Shares in issue.
Free cash flow is a non-IFRS measure and represents the change in cash and cash
equivalents in a given period.
Net cash is a non-IFRS measure. It is calculated by deducting total borrowings
from cash and cash equivalents.
Mining statistical information
The following describes certain line items used in the Acacia Group's
discussion of key performance indicators:
- Open pit material mined - measures in tonnes the total amount of open pit
ore and waste mined.
- Underground ore tonnes hoisted - measures in tonnes the total amount of
underground ore mined and hoisted.
- Underground ore tonnes trammed - measures in tonnes the total amount of
underground ore mined and trammed.
- Total tonnes mined includes open pit material plus underground ore tonnes
hoisted.
- Strip ratio - measures the ratio of waste?to?ore for open pit material
mined.
- Ore milled - measures in tonnes the amount of ore material processed through
the mill.
- Head grade - measures the metal content of mined ore going into a mill for
processing.
- Milled recovery - measures the proportion of valuable metal physically
recovered in the processing of ore. It is generally stated as a percentage of
the metal recovered compared to the total metal originally present.
Risk Review
For 2016 our principal risks have continued to fall within four broad
categories: strategic risks, financial risks, external risks and operational
risks. Generally, the makeup of our principal risks has not significantly
changed throughout the year. However, there have been changes in certain risk
profiles as a result of developments in our operating environment and
developments or trends affecting the wider global economy and/or the mining
industry.
As a result of the review, at the end of 2016 we viewed our principal risks as
relating to the following:
· Security, trespass and vandalism
· Political, legal and regulatory developments
· Safety risks relating to mining operations
· Equipment effectiveness
· Environmental hazards and rehabilitation
· Implementation of enhanced operational systems
· Continuity of power supply
· Significant changes to commodity prices
· Single country risk
Further details as regards our Principal Risks and Uncertainties and risk
assessments conducted in respect thereof will be provided as part of the 2016
Annual Report and Accounts.
Condensed Financial Information
Consolidated income statement
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) Notes 2016 2015
Revenue 5 1,053,532 868,131
Cost of sales (727,080) (734,167)
Gross profit 326,452 133,964
Corporate administration (21,895) (34,455)
Share-based payments (29,929) (5,537)
Exploration and evaluation costs 6 (24,020) (19,737)
Corporate social responsibility expenses (10,665) (12,882)
Impairment charges 7 - (146,201)
Other income/(charges) 8 11,649 (28,079)
Profit/(Loss) before net finance expense and 251,592 (112,927)
taxation
Finance income 9 1,512 1,384
Finance expense 9 (11,047) (12,617)
Profit/(Loss) before taxation 242,057 (124,160)
Tax expense 10 (147,113) (72,988)
Net profit /(loss) for the year 94,944 (197,148)
Earnings per share:
Basic earnings/(loss) per share (cents) 11 23.2 (48.1)
Diluted earnings/(loss) per share (cents) 11 23.1 (48.1)
The notes on pages 36 to 56 are an integral part of this financial information.
Consolidated statement of comprehensive income
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Net profit/(loss) for the year 94,944 (197,148)
Other comprehensive income:
Items that may be subsequently reclassified to
profit or loss:
Changes in fair value of cash flow hedges 7 (459)
Total comprehensive income/(expense) for the year 94,951 (197,607)
The notes on pages 36 to 56 are an integral part of this financial information.
Consolidated balance sheet
As at As at
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) Notes 2016 2015
ASSETS
Non-current assets
Goodwill and intangible assets 216,190 211,190
Property, plant and equipment 13 1,443,176 1,390,713
Deferred tax assets 14 8,431 11,628
Non-current portion of inventory 98,936 72,616
Derivative financial instruments 15 821 849
Other assets 16 63,297 114,964
1,830,851 1,801,960
Current assets
Inventories 184,313 202,321
Trade and other receivables 17 18,830 14,363
Derivative financial instruments 15 1,343 -
Other current assets 17 149,518 78,563
Cash and cash equivalents 317,791 233,268
671,795 528,515
Total assets 2,502,646 2,330,475
EQUITY AND LIABILITIES
Share capital and share premium 929,199 929,199
Other reserves 933,696 858,300
1,862,895 1,787,499
Total equity 1,862,895 1,787,499
Non-current liabilities
Borrowings 18 71,000 99,400
Deferred tax liabilities 14 148,390 95,668
Derivative financial instruments 15 30 1,560
Provisions 19 145,722 127,354
Other non-current liabilities 15,699 4,122
380,841 328,104
Current liabilities
Trade and other payables 222,543 159,866
Borrowings 18 28,400 28,400
Derivative financial instruments 15 584 10,920
Provisions 19 7,235 1,577
Other current liabilities 148 14,109
258,910 214,872
Total liabilities 639,751 542,976
Total equity and liabilities 2,502,646 2,330,475
The notes on pages 36 to 56 are an integral part of this financial information.
Statement of changes in equity
(Unaudited) Share Share Contributed Cash Stock
capital premium surplus/ flow option
Other hedging reserve
reserve reserve
(in thousands of United States
dollars)
Balance at 1 January 2015 62,097 867,102 1,368,713 1,011 3,694
(Audited)
Total comprehensive expense for - - - (459) -
the period
Share option grants - - - - 182
Transactions with non-controlling - - - - -
interest holders
Dividends to equity holders of the - - - - -
Company
Balance at 31 December 2015 62,097 867,102 1,368,713 552 3,876
(Audited)
Total comprehensive income for the - - - 7 -
period
Share option grants - - - - 77
Transactions with non-controlling - - - - -
interest holders
Dividends to equity holders of the - - - - -
Company
Balance at 31 December 2016 62,097 867,102 1,368,713 559 3,953
(Unaudited)
(Unaudited) Accumulated Total Total non- Total
losses owners' controlling equity
equity interests
(in thousands of United States
dollars)
Balance at 1 January 2015 (Audited) (305,250) 1,997,367 4,781 2,002,148
Total comprehensive expense for the (197,148) (197,607) - (197,607)
period
Share option grants - 182 - 182
Transactions with non-controlling 4,781 4,781 (4,781) -
interest holders
Dividends to equity holders of the (17,224) (17,224) - (17,224)
Company
Balance at 31 December 2015 (514,841) 1,787,499 - 1,787,499
(Audited)
Total comprehensive income for the 94,944 94,951 - 94,951
period
Share option grants - 77 - 77
Transactions with non-controlling - - - -
interest holders
Dividends to equity holders of the (19,632) (19,632) - (19,632)
Company
Balance at 31 December 2016 (439,529) 1,862,895 - 1,862,895
(Unaudited)
The notes on pages 36 to 56 are an integral part of this financial information.
Consolidated statement of cash flows
For the year For the year
ended ended
31 December 31 December
(Unaudited)
(Audited)
(in thousands of United States dollars) Notes 2016 2015
Cash flows from operating activities
Net profit/(loss) for the period 94,944 (197,148)
Adjustments for:
Tax expense 147,113 72,988
Depreciation and amortisation 156,301 133,365
Finance items 9,535 11,233
Impairment charges - 146,201
Profit on disposal of property, plant and (289) (1,315)
equipment
Working capital movements 12 (58,497) (4,774)
Other non-cash items 12 (23,850) 3,497
Cash generated from operations before interest 325,257 164,047
and tax
Finance income 1,512 1,384
Finance expenses (8,793) (8,966)
Cash generated by operating activities 317,976 156,465
Cash flows from investing activities
Purchase of property, plant and equipment (193,643) (193,022)
Movement in other assets 6,952 8,330
Acquired mineral interest (5,000) -
Other investing activities 12 6,528 3,256
Cash used in investing activities (185,163) (181,436)
Cash flows from financing activities
Loans paid (28,400) (14,200)
Dividends paid (19,632) (17,224)
Finance lease instalments - (846)
Net cash generated used in financing activities (48,032) (32,270)
Net decrease in cash and cash equivalents 84,781 (57,241)
Net foreign exchange difference (258) (3,341)
Cash and cash equivalents at 1 January 233,268 293,850
Cash and cash equivalents at period end 317,791 233,268
The notes on pages 36 to 56 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 financial information for the year ended 31 December
2016 was approved for issue by the Board of Directors of the Company on 13
February 2017. The condensed consolidated financial information does not
comprise statutory accounts within the meaning of section 434 of the Companies
Act 2006. The condensed consolidated financial information is unaudited.
The Group's primary business is the mining, processing and sale of gold. The
Group has three operating mines located in Tanzania. The Group also has a
portfolio of exploration projects located across Africa.
2. Basis of Preparation of the condensed financial information
The financial information set out above does not constitute the Group's
statutory accounts for the year ended 31 December 2016, but is derived from the
Group's full financial accounts, which are in the process of being audited. The
Group's full financial accounts will be prepared under International Financial
Reporting Standards as adopted by the European Union.
The condensed consolidated financial information has been prepared under the
historical cost convention basis, as modified by the revaluation of financial
assets and financial liabilities (including derivative instruments) at fair
value through profit and loss. The financial statements are presented in US
dollars (US$) and all monetary results are rounded to the nearest thousand
dollars (US) except when otherwise indicated.
Where a change in the presentational format between the prior year and current
year condensed consolidated financial information has been made during the
period, comparative figures have been restated accordingly. No presentational
changes were made in the current year.
The group's activities expose it to a variety of financial risks: market risk
(including currency risk, fair value interest rate risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk. The condensed
financial statements do not include all financial risk management information
and disclosures required in the annual financial statements; they should be
read in conjunction with the group's annual financial statements as at 31
December 2015. There have been no changes in the risk management department or
in any risk management policies since the year end.
The impact of the seasonality on operations is not considered as significant on
the condensed consolidated financial information.
After making the appropriate enquiries, the Directors confirm that they have a
reasonable expectation that the Acacia Group will continue to operate and meet
its liabilities, as they fall due, for the next three years. The Directors'
assessment has been made with reference to the Acacia Group's current position
and prospects, its strategy and the Acacia Group's principal risks and how
these are managed, with particular regard to those which are viewed as having
the most relevance to Acacia continuing in operation, when assessed in terms of
financial and operational planning and impact over a three-year period, being:
environmental hazards and rehabilitation; implementation of enhanced
operational systems; significant change to commodity prices; political, legal
and regulatory developments; safety risks relating to mining operations and
equipment effectiveness. On this basis this condensed consolidated financial
information is presented on a going concern basis.
3. Accounting Policies
Accounting policies have remained consistent with the prior year except for the
adoption of new standards and amendments to standards.
a) New and amended standards adopted by the Group
The following amendments to standards are applicable and were adopted by the
Group for the first time for the financial year beginning 1 January 2016:
· Amendments to IFRS 10, 'Consolidated financial statements' and IAS
28,'Investments in associates and joint ventures' on applying the consolidation
exemption. The amendments clarify the application of the consolidation
exception for investment entities and their subsidiaries. The amendment did not
have a significant impact on the Group financial statements.
· Amendment to IFRS 11, 'Joint arrangements' on acquisition of an interest
in a joint operation. This amendment adds new guidance on how to account for
the acquisition of an interest in a joint operation that constitutes a
business. The amendment did not have a significant impact on the Group
financial statements.
· Amendments to IAS 1,'Presentation of financial statements' disclosure
initiative. In December 2014 the IASB issued amendments to clarify guidance in
IAS 1 on materiality and aggregation, the presentation of subtotals, the
structure of financial statements and the disclosure of accounting policies.
The amendment did not have a significant impact on the Group financial
statements.
· Amendment to IAS 16,'Property, plant and equipment' and IAS 38,'Intangible
assets', on depreciation and amortisation. In this amendment the IASB has
clarified that the use of revenue based methods to calculate the depreciation
of an asset is not appropriate because revenue generated by an activity that
includes the use of an asset generally reflects factors other than the
consumption of the economic benefits embodied in the asset. The IASB has also
clarified that revenue is generally presumed to be an inappropriate basis for
measuring the consumption of the economic benefits embodied in an intangible
asset. The amendment did not have a significant impact on the Group financial
statements.
· Amendments to IAS 27, 'Separate financial statements' on equity
accounting. In this amendment the IASB has restored the option to use the
equity method to account for investments in subsidiaries, joint ventures and
associates in an entity's separate financial statements. The amendment did not
have a significant impact on the Group financial statements.
· IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations'.
This is an amendment to the changes in methods of disposal - Assets (or
disposal groups) are generally disposed of either through sale or through
distribution to owners. The amendment to IFRS 5 clarifies that changing from
one of these disposal methods to the other should not be considered to be a new
plan of disposal, rather it is a continuation of the original plan. There is
therefore no interruption of the application of the requirements in IFRS 5. The
amendment also clarifies that changing the disposal method does not change the
date of classification. The amendment did not have a significant impact on the
Group financial statements.
· IFRS 7 - 'Financial Instruments: Disclosures'. Applicability of the
offsetting disclosures to condensed interim financial statements. The amendment
removes the phrase 'and interim periods within those annual periods' from
paragraph 44R, clarifying that these IFRS 7 disclosures are not required in the
condensed interim financial report. However, the Board noted that IAS 34
requires an entity to disclose an explanation of events and transactions that
are significant to an understanding of the changes in financial position and
performance of the entity since the end of the last annual reporting period'.
Therefore, if the IFRS 7 disclosures provide a significant update to the
information reported in the most recent annual report, the Board would expect
the disclosures to be included in the entity's condensed interim financial
report. The amendment did not have a significant impact on the Group financial
statements.
· IAS 19 - 'Employee Benefits'. Discount rate: regional market issue - The
amendment to IAS 19 clarifies that market depth of high quality corporate bonds
is assessed based on the currency in which the obligation is denominated,
rather than the country where the obligation is located. When there is no deep
market for high quality corporate bonds in that currency, government bond rates
must be used. The amendment did not have a significant impact on the Group
financial statements.
b) New and amended standards, and interpretations not yet adopted
The following standards and amendments to existing standards have been
published and are mandatory for the Group's accounting periods beginning on or
after 1 January 2016:
· Amendments to IFRS 10, 'Consolidated financial statements' and IAS
28,'Investments in associates and joint ventures' on sale or contribution of
assets. The IASB has issued this amendment to eliminate the inconsistency
between IFRS 10 and IAS 28. The IASB decided to defer the application date of
this amendment, until such time this is not applicable. The amendment is
however not expected to have a significant impact on the Group.
· Amendments to IAS 12, 'Recognition of Deferred Tax Assets for Unrealised
Losses'. Amendments made to IAS 12 will aim to clarify the accounting for
deferred tax where an asset is measured at fair value and that fair value is
below the asset's tax base. Effective 1 January 2017. The amendment is however
not expected to have a significant impact on the Group.
· Amendments to IAS 7, 'Disclosure Initiative'. Going forward, entities will
be required to explain changes in their liabilities arising from financing
activities. This includes changes arising from cash flows (e.g. drawdowns and
repayments of borrowings) and non-cash changes such as acquisitions, disposals,
accretion of interest and unrealised exchange differences. Changes in financial
assets must be included in this disclosure if the cash flows were, or will be,
included in cash flows from financing activities. Effective 1 January 2017. The
amendment is however not expected to have a significant impact on the Group.
· IFRS 15 - Revenue from contracts with customers. This standard is a
single, comprehensive revenue recognition model for all contracts with
customers to achieve greater consistency in the recognition and presentation of
revenue. Revenue is recognised based on the satisfaction of performance
obligations, which occurs when control of good or service transfers to a
customer. Effective 1 January 2018. The standard is not expected to have a
significant impact on the Group.
· IFRS 9 - Financial Instruments (2009 &2010). The IASB has updated IFRS 9,
'Financial instruments' to include guidance on financial liabilities and
de-recognition of financial instruments. The accounting and presentation for
financial liabilities and for derecognising financial instruments has been
relocated from IAS 39, 'Financial instruments: Recognition and measurement',
without change, except for financial liabilities that are designated at fair
value through profit or loss. . Effective 1 January 2018. The standard is not
expected to have a significant impact on the Group.
· Amendment to IFRS 9 -'Financial instruments', on general hedge accounting.
The IASB has amended IFRS 9 to align hedge accounting more closely with an
entity's risk management. The revised standard also establishes a more
principles-based approach to hedge accounting and addresses inconsistencies and
weaknesses in the current model in IAS 39. The transitional provisions
described above are likely to change once the IASB completes all phases of IFRS
9. Effective 1 January 2018. The amendment is not expected to have a
significant impact on the Group.
· IFRS 16 - 'Leases'. IFRS 16 supersedes IAS 17, 'Leases', IFRIC 4,
'Determining whether an Arrangement contains a Lease', SIC 15, 'Operating
Leases - Incentives' and SIC 27, 'Evaluating the Substance of Transactions
Involving the Legal Form of a Lease'. Effective 1 January 2019. The standard is
not expected to have a significant impact on the Group.
4. Segment Reporting
The Group has only one primary product produced in a single geographic
location, being gold produced in Tanzania. In addition the Group produces
copper and silver as a co-product. Reportable operating segments are based on
the internal reports provided to the Chief Operating Decision Maker ("CODM") to
evaluate segment performance, decide how to allocate resources and make other
operating decisions. After applying the aggregation criteria and quantitative
thresholds contained in IFRS 8, the Group's reportable operating segments were
determined to be: North Mara gold mine; Bulyanhulu gold mine; Buzwagi gold
mine; a separate Corporate and Exploration segment, which primarily consist of
costs related to other charges and corporate social responsibility expenses.
Segment results and carrying values include items directly attributable to the
segment as well as those that can be allocated on a reasonable basis. Segment
carrying values are disclosed and calculated as shareholders equity after
adding back debt and intercompany liabilities, and subtracting cash and
intercompany assets. Capital expenditures comprise of additions to property,
plant and equipment. The Group has also included segment cash costs and all-in
sustaining cost per ounce sold.
Segment information for the reportable operating segments of the Group for the
periods ended 31 December 2016 and 31 December 2015 is set out below.
For the year ended 31 December 2016
(Unaudited) North Mara Bulyanhulu Buzwagi Other Total
(in thousands of United States
dollars)
Gold revenue 468,340 345,481 200,648 - 1,014,469
Co-product revenue 953 15,447 22,663 - 39,063
Total segment revenue 469,293 360,928 223,311 - 1,053,532
Segment cash operating cost1 (155,344) (217,226) (188,896) - (561,466)
Realised losses on gold hedges - - (1,818) - (1,818)
Corporate administration (7,954) (5,975) (4,176) (3,790) (21,895)
Share-based payments (623) (518) (470) (28,318) (29,929)
Exploration and evaluation (297) (3,532) - (20,191) (24,020)
costs
Other charges and corporate (2,295) (3,442) (723) 7,444 984
social responsibility expenses
EBITDA2 302,780 130,235 27,228 (44,855) 415,388
Impairment charges - - - - -
Depreciation and amortisation4 (67,472) (82,022) (12,668) (1,634) (163,796)
EBIT2 235,308 48,213 14,560 (46,489) 251,592
Finance income 1,512
Finance expense (11,047)
Profit before taxation 242,057
Tax expense (147,113)
Net profit for the period 94,944
Capital expenditure:
Sustaining 23,558 20,231 3,582 1,416 48,787
Expansionary 2,399 1,262 - - 3,661
Capitalised development 75,609 63,082 - - 138,691
101,566 84,575 3,582 1,416 191,139
Non-cash capital expenditure adjustments
Reclamation asset addition 6,703 10,728 4,524 - 21,955
Total capital expenditure 108,269 95,303 8,106 1,416 213,094
Segmental cash operating cost 155,344 217,226 188,896 561,466
Deduct: co-product revenue (953) (15,447) (22,663) (39,063)
Total cash costs 154,391 201,779 166,233 522,403
Sold ounces 376,255 279,286 161,202 816,743
Cash cost per ounce sold2 410 722 1,031 640
Corporate administration 21 21 26 27
charges
Share based payments 2 2 3 37
Rehabilitation - accretion and 9 7 3 7
depreciation
Corporate social responsibility 15 6 10 13
expenses
Capitalised stripping/ UG 201 226 - 170
development
Sustaining capital expenditure 75 74 22 64
All-in sustaining cost per 733 1,058 1,095 958
ounce sold2
Segment carrying value3 246,175 1,231,793 97,243 82,710 1,657,921
For the year ended 31 December 2015
North Mara Bulyanhulu Buzwagi Other Total
(Audited)
(US$'000,except per ounce
amounts)
Gold revenue 335,144 304,559 192,759 - 832,462
Co-product revenue 563 14,556 20,550 - 35,669
Total segment revenue 335,707 319,115 213,309 - 868,131
Segment cash operating cost1 (171,133) (226,129) (195,208) - (592,470)
Corporate administration (13,897) (11,107) (8,424) (1,027) (34,455)
Share-based payments (31) (597) 54 (4,963) (5,537)
Exploration and evaluation (389) (4,354) (64) (14,930) 19,737)
costs
Other charges and corporate (15,629) (17,796) (8,193) 657 (40,961)
social responsibility expenses
EBITDA2 134,628 59,132 1,474 (20,263) 174,971
Impairment charges - - (146,201) - (146,201)
Depreciation and amortisation4 (67,459) (52,589) (19,246) (2,403) (141,697)
EBIT2 67,169 6,543 (163,973) (22,666) (112,927)
Finance income 1,384
Finance expense (12,617)
Loss before taxation (124,160)
Tax expense (72,988)
Net loss for the year (197,148)
Capital expenditure:
Sustaining 13,229 42,419 10,855 974 67,477
Expansionary 962 (957) - - 5
Capitalised development 48,376 59,830 1,480 - 109,686
62,567 101,292 12,335 974 177,168
Non-cash capital expenditure
adjustments
Reclamation asset reduction (18,909) (5,664) (7,363) - (31,936)
Total capital expenditure 43,658 95,628 4,972 974 145,232
Segmental cash operating cost 171,133 226,129 195,208 592,470
Deduct: co-product revenue (563) (14,556) (20,550) (35,669)
Total cash costs 170,570 211,573 174,658 556,801
Sold ounces 288,905 265,341 166,957 721,203
Cash cost per ounce sold2 590 797 1,046 772
Corporate administration 48 52 50 48
charges
Share-based payments - 2 - 8
Rehabilitation - accretion and 22 6 6 12
depreciation
Corporate social responsibility 19 11 11 18
expenses
Capitalised stripping/ UG 167 225 9 152
development
Sustaining capital expenditure 69 160 65 102
All-in sustaining cost per 915 1,253 1,187 1,112
ounce sold2
Segment carrying value3 284,876 1,257,299 80,654 72,851 1,695,680
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 26 for definitions.
3 Segment carrying values are calculated as shareholders equity after adding
back debt and intercompany liabilities, and subtracting cash and intercompany
assets and include outside shareholders' interests.
4 Depreciation and amortisation include the depreciation component of the cost
of inventory sold.
5. Revenue
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Gold doré sales 739,317 567,478
Gold concentrate sales¹ 275,152 264,984
Copper concentrate sales¹ 32,658 31,028
Silver sales 6,405 4,641
Total 1,053,532 868,131
1 Concentrate sales includes negative provisional price adjustments to the
accounts receivable balance due to changes in market gold, silver and copper
prices prior to final settlement as follows: US$7.0 million for the year ended
31 December 2016 (US$4.0 million for the year ended 31 December 2015).
(in thousands of United States dollars) For the For the year
year ended ended
31 December 31 December
(Unaudited) (Audited)
Revenue by Location of Customer2 2016 2015
Europe
Switzerland 488,383 30,676
Germany 58,747 78,553
Belgium - 486
Asia
India 253,881 538,543
China 176,143 136,439
Japan 76,378 83,434
Total revenue 1,053,532 868,131
2 Revenue by location of customer is determined based on the country
to which the gold is delivered.
Included in revenues for the year ended 31 December 2016 are sales to six major
customers. Revenues of approximately US$913 million (2015: US$604 million)
arose from sales to four of the Group's largest customers.
6. Exploration and Evaluation costs
The following represents a summary of exploration and evaluation expenditures
incurred at each mine site and significant exploration targets (if applicable).
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Expensed during the year:
North Mara 297 389
Buzwagi - 64
Bulyanhulu 3,532 4,354
Kenya 10,582 8,248
West Africa 7,544 4,780
Other1 2,065 1,902
Total expensed 24,020 19,737
Capitalised during the year:
North Mara 2,399 962
Total 26,419 20,699
1 - Included in "other" are the exploration activities conducted through ABG
Exploration Limited. All primary greenfield exploration and evaluation
activities are conducted in this company.
7. Impairment
In accordance with IAS 36 "Impairment of assets" and IAS 38 "Intangible Assets"
a review for impairment of goodwill is undertaken annually, or at any time an
indicator of impairment is considered to exist, and in accordance with IAS 16
"Property, plant and equipment" a review for impairment of long-lived assets is
undertaken at any time an indicator of impairment is considered to exist.
During 2015, the prevailing gold price fell significantly which forced a review
of the gold price outlook used for long-term planning and reserve estimation.
As reported in the consolidated financial statements for the year ended 31
December 2015, on a gross basis, and before taking into account the impact of
deferred tax, the total impairment charge booked in 2015 amounted to US$146.2
million at Buzwagi. At Bulyanhulu and North Mara, the impairment review did not
indicate a need for impairment because the recoverable amount was calculated as
higher than the carrying values.
During 2016, the annual review for impairment of goodwill and indefinite life
assets was performed. The review compared the recoverable amount of assets for
the cash generating units ("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 2016 and 2015 were:
For the year ended For the year ended
31 December 31 December
2016 2015
Gold price per ounce (2016) - US$1,100
Gold price per ounce (2017) US$1,200 US$1,150; US$1,100
(Buzwagi)
Gold price per ounce(Long term) US$1,200 US$1,200; US$1,100
(Buzwagi)
Copper price per pound US$2.25 US$2.00 (2016); US$2.25
(2017); US$2.50 (2018+)
South African Rand (US$:ZAR) 14 12.5
Tanzanian Shilling (US$:TZS) 2,150 2,100
Long-term oil price per barrel US$60 US$50 (2016); US$65
(2017); US$75 (2018+)
Discount rate 5% 5%
NPV multiples 1 1
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.
8. Other (Income)/ Charges
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Other expenses
Restructuring costs 7,689 9,864
Foreign exchange losses - 23,130
Disallowed indirect taxes 1,447 1,846
Legal costs 2,641 2,502
One off legal settlement - 7,300
Government levies and charges - 256
Project development costs 1,123 233
Other 3,136 3,299
Total 16,036 48,430
Other income
Bad debts recovered (54) (465)
Discounting of indirect tax receivables (9,719) (5,906)
Profit on disposal of property, plant and equipment (289) (1,315)
Unrealised non-hedge derivative gains (13,031) (2,293)
Foreign exchange gains (1,137) -
Insurance proceeds (3,455) -
De-recognition of finance lease liabilities - (3,918)
De-recognition of deferred consideration - (5,313)
Proceeds from earn-in agreement - (1,000)
Other - (141)
Total (27,685) (20,351)
Total other (income)/charges (11,649) 28,079
9. Finance Income and Expenses
a) Finance income
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Interest on time deposits 1,236 910
Other 276 474
Total 1,512 1,384
b) Finance expense
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Unwinding of discount1 2,254 3,651
Revolving credit facility charges2 2,279 2,192
Interest on CIL facility 3,956 5,106
Interest on finance leases - 408
Bank charges 701 516
Other 1,857 744
Total 11,047 12,617
1 The unwinding of discount is calculated on the environmental
rehabilitation provision.
2 Included in credit facility charges are the amortisation of the fees
related to the revolving credit facility as well as the monthly interest and
facility fees.
10. Tax Expense
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Current tax:
Current tax on profits for the year 54,508 -
Adjustments in respect of prior years1 36,697 -
Total current tax 91,205 -
Deferred tax:
Origination and reversal of temporary differences2 55,908 72,988
Total deferred tax 55,908 72,988
Income tax expense 147,113 72,988
1 Included in this amount 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 is a provision for uncertain tax positions of US$35.0
million relating to Bulyanhulu following an adverse tax ruling, as reported in
Q1 2016.
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to the profits
of the consolidated entities as follows:
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
(Loss)/ profit before tax 242,057 (124,160)
Tax calculated at domestic tax rates applicable to profits in 73,373 (35,932)
the respective countries
Tax effects of:
Expenses not deductible for tax purposes 247 676
Tax losses for which no deferred income tax asset was 76,592 88,702
recognised3
Adjustments to unrecognised tax benefits carried forward4 - 12,740
Prior year adjustments (3,099) 6,802
Tax charge 147,113 72,988
3 Included in 2015 is the tax impact of US$42.5 million of deferred tax assets
derecognised at Buzwagi following the impairment review.
4 The 2015 reconciliation includes an amount of US$12.7 million relating to an
increase in the amount of unrecognised tax benefits 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.
11. Earnings /(Loss) Per Share (EPS)
Basic EPS is calculated by dividing the net profit/(loss) for the year
attributable to owners of the Company by the weighted average number of
Ordinary Shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average
number of Ordinary Shares outstanding to assume conversion of all dilutive
potential Ordinary Shares. The Company has dilutive potential Ordinary Shares
in the form of stock options. The weighted average number of shares is adjusted
for the number of shares granted assuming the exercise of stock options.
At 31 December 2016 and 31 December 2015, earnings per share have been
calculated as follows:
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Earnings/(Loss)
Net profit/(loss) from continuing operations attributable to 94,944 (197,148)
owners of the parent
Weighted average number of Ordinary Shares in issue 410,085,499 410,085,499
Adjusted for dilutive effect of stock options 355,514 258,139
Weighted average number of Ordinary Shares for diluted earnings 410,441,013 410,343,638
per share
Earnings/(Loss) per share
Basic earnings/(loss) per share (cents) 23.2 (48.1)
Dilutive earnings/(loss) per share (cents) 23.1 (48.1)
12. Cash flow - other items
a) Operating cash flows - other items
Movements relating to working capital items
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Indirect and corporate taxes1 (59,100) (24,177)
Increase in current indirect tax receivable (18,224) (24,177)
Prepaid corporate tax (20,000) -
Income tax paid (20,876) -
Other current assets 695 8,152
Trade receivables (4,472) 20,626
Inventories2 (8,312) (28,106)
Other liabilities3 33,582 6,102
Share based payments3 (35,966) (1,803)
Trade and other payables4 15,931 8,448
Other working capital items5 (855) 5,984
Total (58,497) (4,774)
1 During the year, we have made US$20.0 million corporate tax prepayments in
line with the MoU entered into with the Tanzanian Government in Q1 2016. This
has been funded through an offset against current indirect taxes that was due
for refund. In addition, we have paid provisional corporate taxes in relation
to North Mara of US$20.9 million, which was paid through offset against
indirect tax receivables agreed under the MOS entered into in 2012. VAT refunds
received in 2016 amounted to US$63 million (2015: US$86 million).
2 The inventory adjustment includes the movement in current as well as the
non-current portion of inventory and has been adjusted for the non-cash
impairment impact of 2015.
3 The other liabilities adjustment mainly relate to the revaluation of future
shared based payments. During the year, share based payments of US$36.0 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 year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Adjustments for non-cash income statement items:
Foreign exchange (gains)/losses (1,463) 19,789
Discounting of indirect tax receivables (9,719) (5,906)
Provisions settled (8) (2,445)
Unrealised gain on derivatives (13,031) (2,293)
Stock option expense 77 182
De-recognition of deferred consideration - (5,313)
Other non-cash items 36 (3,858)
Exchange loss on revaluation of cash balances 258 3,341
Total (23,850) 3,497
b) Investing cash flows - other items
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Proceeds on sale of property, plant and equipment 6,713 3,662
Other long-term receivables (10) 151
Rehabilitation expenditure (175) (557)
Total 6,528 3,256
13. Property, Plant and Equipment
For the year ended 31 Plant and Mineral Assets under Total
December 2016 (Unaudited) equipment properties and construction¹
(in thousands of United mine development
States dollars) costs
At 1 January 2016, net of 572,877 761,592 56,244 1,390,713
accumulated depreciation
Additions - - 191,139 191,139
Non-cash reclamation asset - - 21,955 21,955
adjustment
Foreign currency translation 2,203 - - 2,203
adjustments
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 (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 (1,360,529) (935,258) - (2,295,787)
impairment
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.
For the year ended 31 Plant and Mineral Assets under Total
December 2015 (Audited) equipment properties and construction¹
(in thousands of United mine development
States dollars) costs
At 1 January 2015, net of 570,569 710,812 143,934 1,425,315
accumulated depreciation
Additions - - 177,168 177,168
Non-cash reclamation - - (31,936) (31,936)
asset adjustment
Foreign currency (4,149) - - (4,149)
translation adjustments
Disposals/write-downs (4,820) - - (4,820)
Impairments2 (18,571) (18,929) - (37,500)
Depreciation (78,105) (55,260) - (133,365)
Transfers between 107,953 124,969 (232,922) -
categories
At 31 December 2015 572,877 761,592 56,244 1,390,713
At 1 January 2015
Cost 1,750,743 1,511,444 143,934 3,406,121
Accumulated depreciation (1,180,174) (800,632) - (1,980,806)
Net carrying amount 570,569 710,812 143,934 1,425,315
At 31 December 2015
Cost 1,845,234 1,636,413 56,244 3,537,891
Accumulated depreciation (1,272,357) (874,821) - (2,147,178)
and impairment
Net carrying amount 572,877 761,592 56,244 1,390,713
1 Assets under construction represents (a) sustaining capital expenditures
incurred constructing property, plant and equipment related to operating mines
and advance deposits made towards the purchase of property, plant and
equipment; and (b) expansionary expenditure allocated to a project on a
business combination or asset acquisition, and the subsequent costs incurred to
develop the mine. Once these assets are ready for their intended use, the
balance is transferred to plant and equipment and/or mineral properties and
mine development costs.
2 The impairment in 2015 relates to property, plant and equipment at Buzwagi.
Refer to note 7 for further details.
Leases
Property, plant and equipment include assets relating to the design and
construction costs of power transmission lines and related infrastructure. At
completion, ownership was transferred to TANESCO in exchange for amortised
repayment in the form of reduced electricity supply charges. No future lease
payment obligations are payable under these finance leases.
Property, plant and equipment also include five drill rigs purchased under
short-term finance leases.
The following amounts were included in property, plant and equipment where the
Group was a lessee under a finance lease:
As at As at
31 December 31 December
(in thousands of United States dollars) 2016 2015
(Unaudited) (Audited)
Cost - capitalised finance 51,617 51,617
leases
Accumulated depreciation and (40,925) (37,952)
impairment
Net carrying amount 10,692 13,665
14. Deferred Tax Assets and Liabilities
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
As at As at
31 December 31 December
(in thousands of United States dollars) (Unaudited) (Audited)
2016 2015
Tax losses 648,984 520,591
Total 648,984 520,591
The above tax losses, which translate into deferred tax assets of approximately
US$184 million (2015: US$149 million), have not been recognised in respect of
these items due to uncertainties regarding availability of tax losses, or there
being uncertainty regarding future taxable income against which these assets
can be utilised.
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Balance sheet classifications
Balance sheet classification Assets Liabilities Net
(in thousands of United States 2016 2015 2016 2015 2016 2015
dollars)
Property, plant and equipment1 - - 390,050 380,264 390,050 380,264
Provisions (4,456) (5,144) - - (4,456) (5,144)
Interest deferrals (479) (63) - 522 (479) 459
Tusker acquisition - - 6,354 6,478 6,354 6,478
Tax loss carry-forwards (251,510) (298,017) - - (251,510) (298,017)
Net deferred tax (assets)/ (256,445) (303,224) 396,404 387,264 139,959 84,040
liabilities
Legal entities
Legal entities Assets Liabilities Net
(in thousands of United States 2016 2015 2016 2015 2016 2015
dollars)
North Mara Gold Mine Ltd1 - - 77,529 69,662 77,529 69,662
Bulyanhulu Gold Mine Ltd - - 64,539 19,528 64,539 19,528
Pangea Minerals Ltd1 (7,504) (11,447) - - (7,504) (11,447)
Other (927) (181) 6,322 6,478 5,395 6,297
Net deferred tax (assets)/ (8,431) (11,628) 148,390 95,668 139,959 84,040
liabilities
Uncertainties regarding availability of tax losses in respect of enquiries
raised and additional tax assessments issued by the TRA, have been measured
using the single best estimate of likely outcome approach resulting in the
recognition of substantially all the related deferred tax assets and
liabilities. Alternative acceptable measurement policies (e.g. on a weighted
average expected outcome basis) could result in a change to deferred tax assets
and liabilities being recognised, and the deferred tax charge in the income
statement.
No deferred tax has been recognised in respect of temporary differences
associated with investments in subsidiaries where the Group is in a position to
control the timing of the reversal of the temporary differences, and it is
probable that such differences will not reverse in the foreseeable future. The
aggregate amount of temporary differences associated with such investments in
subsidiaries is represented by the contribution of those investments to the
Group's retained earnings and amounted to US$411 million (2015: US$391
million).
15. Derivative Financial Instruments
The table below analyses financial instruments carried at fair value, by
valuation method. The Group has derivative financial instruments in the form of
economic and cash flow hedging contracts which are all defined as level two
instruments as they are valued using inputs other than quoted prices that are
observable for the assets or liabilities. The following tables present the
group's assets and liabilities that are measured at fair value at 31 December
2016 and 31 December 2015.
Assets Liabilities
For the year ended 31 December 2016 Current Non-current Current Non-current Net fair
(in thousands of United States value
dollars)
Interest contracts: Designated as cash 33 255 73 - 215
flow hedges
Commodity contracts: Not designated as 1,310 566 511 30 1,335
hedges
Total 1,343 821 584 30 1,550
Assets Liabilities
For the year ended 31 December 2015 Current Non-current Current Non-current Net fair
(in thousands of United States value
dollars)
Interest contracts: Designated as cash - 849 490 - 359
flow hedges
Commodity contracts: Not designated as - - 10,430 1,560 (11,990)
hedges
Total - 849 10,920 1,560 (11,631)
16. Other Assets
As at As at
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Amounts due from government1 11,748 12,078
Operating lease prepayments - TANESCO powerlines 809 1,261
Prepayments - Acquisition of rights over leasehold 42,250 48,419
land2
Non-current portion of indirect tax receivable3 7,945 52,671
Village housing 254 253
Deferred finance charges 291 282
Total 63,297 114,964
1 Included in this amount are amounts receivable from the Tanzanian Social
Security Fund of US$5.4 million (2015: US$5.3 million) as well as amounts due
from TANESCO of US$3.1 million (2015: US$2.7 million).
2 Prepayments made to the landowners in respect of acquisition of the rights
over the use of leasehold land.
3 The non-current portion of indirect tax receivables was subject to
discounting to its current value using a discount rate of 5% (2015: 5%). This
resulted in a discounting credit of US$9.7 million (2015: US$5.9 million) to
the income statement (refer note 8).
17. Trade Receivables and Other Current Assets
As at As at
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Trade and other receivables:
Amounts due from doré and concentrate sales 7,841 5,435
Other receivables¹ 12,023 9,940
Due from related parties 40 116
Less: Provision for doubtful debt on other receivables (1,074) (1,128)
Total 18,830 14,363
1 Other receivables relates to employee and supplier back charge-related
receivables and refundable deposits.
Trade receivables other than concentrate receivables are non-interest bearing
and are generally on 30-90 day terms. Concentrate receivables are generally on
60-120 day terms depending on the terms per contract. Trade receivables are
amounts due from customers in the ordinary course of business. If collection is
expected in one year or less, they are classified as current assets; if not,
they are presented as non-current assets. The carrying value of trade
receivables recorded in the financial statements represents the maximum
exposure to credit risk. The Group does not hold any collateral as security.
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less any
provisions for impairment. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables.
As at As at
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2016 2015
Other current assets:
Current portion of indirect tax receivables² 128,423 57,557
Other receivables and advance payments³ 21,095 21,006
Total 149,518 78,563
2 The current portion of indirect tax receivables includes an amount of US$32.9
million which was transferred from non-current indirect tax receivables as it
is expected that the current portion will be recovered within the next year.
3 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$5.0 million (2015: US$5.1
million).
18. 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. The interest rate has been fixed at 3.6% through the use of an interest
rate swap. The seven year Facility is repayable in equal bi-annual instalments
over the term of the Facility, after a two year repayment holiday period. The
full facility of US$142 million was drawn at the end of 2013. The first
principal payment of US$14.2 million was paid in H2 2015 and during 2016 two
payments of US$14.2 million were paid. As at 31 December 2016 the balance owing
was US$99.4 million (2015: US$127.8 million). Interest accrued to the value of
US$0.6 million (2015: US$0.7 million) was included in accounts payable at year
end. Interest incurred on the borrowings as well as hedging losses on the
interest rate swap for the year ended 31 December 2016 was US$4.0 million
(2015: US$5.1 million).
19. Provisions
Rehabilitation¹ Other² Total
(in thousands of United 2016 2015 2016 2015 2016 2015
States dollars)
At 1 January 128,170 157,012 761 3,206 128,931 160,218
Change in estimate³ 21,956 (31,936) - - 21,956 (31,936)
Utilised during the year (175) (557) (9) (2,445) (184) (3,002)
Unwinding of discount 2,254 3,651 - - 2,254 3,651
At 31 December 152,205 128,170 752 761 152,957 128,931
Current portion (6,483) (816) (752) (761) (7,235) (1,577)
Non-current portion 145,722 127,354 - - 145,722 127,354
1 Rehabilitation provisions relate to the decommissioning costs expected to be
incurred for the operating mines. This expenditure arises at different times
over the LOM for the different mine sites and is expected to be utilised in
terms of cash outflows between years 2017 and 2054 and beyond, varying from
mine site to mine site. The change in estimate in the current year relates
mainly to an update in estimate around closure related retrenchment costs, and
a reduction in the US risk free rates driven a change in discount rate.
2 Other provisions relate to provisions for legal and tax-related liabilities
where the outcome is not yet certain but it is expected that it will lead to a
probable outflow of economic benefits in future.
3 Toward the end of 2015 reclamation guarantees for the mine sites were
discussed with the Ministry of Energy and Minerals including the required
rehabilitation activity. These discussions, in conjunction with the annual
review of closure estimates and closure planning have resulted in a
re-estimation of the basis and assumptions for cost estimates and periods of
closure needed.
Rehabilitation obligations arise from the acquisition, development,
construction and normal operation of mining property, plant and equipment, due
to government controls and regulations that protect the environment on the
closure and reclamation of mining properties. The major parts of the carrying
amount of the obligation relate to tailings and waste rock dumps closure/
rehabilitation and surface contouring; demolition of buildings/mine facilities;
ongoing water treatment; and ongoing care and maintenance of closed mines. The
fair values of rehabilitation provisions are measured by discounting the
expected cash flows using a discount factor that reflects the credit-adjusted
risk-free rate of interest. Acacia prepares estimates of the timing and amount
of expected cash flows when an obligation is incurred and updates expected cash
flows to reflect changes in facts and circumstances. The principal factors that
can cause expected cash flows to change are: the construction of new processing
facilities; changes in the quantities of material in reserves and a
corresponding change in the LOM plan; changing ore characteristics that impact
required environmental protection measures and related costs; changes in water
quality that impact the extent of water treatment required; and changes in laws
and regulations governing the protection of the environment. Each year Acacia assesses cost estimates and other assumptions used in the valuation of the rehabilitation provision at each mineral property to reflect events, changes in circumstances and new information available. Changes in these cost estimates and assumptions are recorded as an adjustment to the carrying amount of the corresponding asset. Rehabilitation provisions are adjusted to reflect the passage of time (accretion) calculated by applying the discount factor implicit in the initial fair-value measurement to the beginning-of-period carrying amount of the provision. Settlement gains/losses will be recorded in other (income)/expense. Other environmental remediation costs that are not rehabilitation provisions are expensed as incurred. 20. Commitments and Contingencies The Group is subject to various laws and regulations which, if not observed, could give rise to penalties. As at 31 December 2016, the Group has the following commitments and/or contingencies. a) Legal contingencies As at 31 December 2016, the Group was a defendant in approximately 185 lawsuits. The plaintiffs are claiming damages and interest thereon from various members of the Group in connection with one or more of the following: land compensation and resettlement, alleged breaches of contract for various goods and services, employment and labour related matters, historical exploration agreements with third parties. The Group's Legal Counsel is defending the Group's current position, and the outcome of the lawsuits cannot presently be determined. Included in the total amounts claimed are the following: An adjudication claim for US$115 million by Bismark Hotel Limited relating to an alleged breach of contract under an Optional Agreement signed in 1995. The claim relates to an application for a prospecting licence with no attributable reserves, resources or value. We are waiting for the adjudicators to fix a hearing date. Management are of the opinion that the claim is without merit and that it will be successfully defended. An arbitration award of US$ 4 million, relating to a historical arbitration between North Mara Gold Mine Limited (NMGML) and Diamond Motors Limited (DML) in respect of an alleged breach of contract claim in relation to the interpretation of periodic rate review requirements and other provisions of drilling services contracts. NMGML counterclaimed against the amount and raised a provision of US$6.2 million reflecting the view of NMGML as to the proper interpretation and application of the rate review clauses of the contracts. An arbitral tribunal decided in favour of NMGML on the material grounds of the claim on 10 August 2015, with an award of US$4 million for unpaid rates to DML for the period up to September 2013. The Tribunal found that the subsequent period fell to be determined by negotiation of the parties pursuant to the contractual terms and should be calculated based on the tribunal's judgment. After the Award was issued, DML: (i) sought to challenge the Award in the Commercial Court; and (ii) filed a winding up application against NMGML based on unpaid rates for 2014 and 2015. NMGML petitioned the High Court to stay the winding up petition, given that the underlying debt and alleged indebtedness for 2014/2015 must be determined by arbitration. The stay was rejected on the basis that winding up procedures cannot be determined by arbitration. This decision is on appeal. DML recently applied to strike out the appeal on the basis that the record on appeal was not timely filed. We will be opposing this application, which may not be heard by the Court of Appeal for some months. We are currently assessing options available to determine the amount payable to DML for 2014/2015 in order to reach an agreement on this and to have all Court proceedings set aside. The hearing for the application to wind up North Mara has yet to be scheduled. Payment has been made for the Arbitration award (US$4 million) and we continue to carry a provision of US$2.2 million as provisioned for the first arbitration. Contractor claims relating to alleged compensation events under the Bulyanhulu CIL plant construction contract, purporting to relate to matters which provide grounds for additional amounts payable for scope of work variations and/or extensions of time to the agreed project execution timetable. The alleged contractor claims relate to a wide range of subject matters including logistics delays, procurement delays, additional works, rainfall delays, price escalation, certain matters relating to taxation, entitlement to contingency amounts and other retained monies. The aggregate value of MDM claims is US$50,438,630.25 and ZAR 33,066,481.49. Bulyanhulu is of the opinion that the majority of MDM's claims are defendable. In turn, Bulyanhulu has counterclaimed for payment of delay damages due to continuing delays in execution of the project amounting to US$20,016,000 in aggregate, multiple defects claims (as remedied and as to be remedied) relating to the design and build of the CIL plant, amounting to US$14,565,228 in aggregate, an overall fit for purpose claim as a result of various grounds of negligence in the design and construction of the CIL plant amounting to US$31,393,877.10 in aggregate and additional transportation costs of US$1,539,795. No provision has been made however; we carry an accrual of unpaid project amounts of approximately US$6,000,000. A contractual dispute between various Acacia operating companies and Petrolube/ ISA to the value of US$35.1 million. The Acacia entities terminated contractual supply relationships for: (i) the provision of hoses, fittings and assembly services to operating entities by ISA on Notice of 5 July 2016; and (ii) the provision of lubricants and associated services by Petrolube to operating entities on 5 July 2016, in each case pursuant to the termination without cause provisions in the agreement, and following retendering of relevant services and as a result of various breaches of contract relating to the provisions of Petrolube/ISA services (including issues relating to reliability of prior supplies and quality of products) and various other breaches of contract by Petrolube/ISA. Subsequent to the commencement of contractual dispute proceedings Petrolube/ISA commenced court proceedings to have the termination of the agreements set aside and to recover various damages limbs, including loss of profits, and other general damages (US$ 56,080,878.46 - Petrolube Claim and US$ 24,868,942.64 ISA Claim). We have challenged all elements of the Court proceedings and have also challenged jurisdiction of the Court, given that the contracts require all disputes to be referred to arbitration following principal to principal dispute discussions. We have commenced arbitration proceedings in connection will all elements of the disputes, as required by the applicable contractual dispute processes. A claim for compensation against NMGML in relation to the destruction of an office building and stone crusher machine. The damage to the property was caused by the Tanzanian Police Force. The claim has been refilled in the High Court and awaits scheduling. Management expects to be able to defend the claim successfully as the damage of the property was caused by the Tanzanian Police Force; therefore no provision has been made. A claim for breach of contract against Bulyanhulu Gold Mine Limited in relation to a new office building which Bulyanhulu had contracted to rent. However, Bulyanhulu had withdrawn from the contract as the owner was unable to honour the terms; and the construction of the building in question was not completed. Management expects to be able to defend the claim successfully as the construction of the office building was never completed; therefore no provision has been made. 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: A TRA assessment of US$21.3 million in respect of Tusker Gold Limited. The tax assessment is based on the sales price of the Nyanzaga property of US$71 million multiplied by the tax rate of 30%. Management is of the view that the assessment is invalid due to the fact that the acquisition is for Tusker Gold Limited, a company incorporated in Australia. The shareholding of the Tanzanian related entities did not change and the Tusker Gold Limited group structure remains the same as prior to the acquisition. The case was decided in favour of Acacia however the TRA appealed that decision. The tax tribunal upheld the decision in favour of Acacia however the TRA has appealed to the Court of Appeal. We are awaiting a hearing date to be set. A TRA assessment to the value of US$41.3 million for withholding tax on certain historic offshore dividend payments paid by Acacia Mining plc to its shareholders. Acacia is appealing this assessment on the substantive grounds that, as an English incorporated company, it is not resident in Tanzania for taxation purposes. The appeal is currently pending at the Court of Appeal and the substantive grounds of appeal will be filed on receipt of the record of appeal required from the lower tribunals. Further TRA assessments issued to Acacia Mining plc to the value of US$500.7 million, based on an allegation that Acacia is resident in Tanzania for corporate and dividend withholding tax purposes. The corporate tax assessments have been levied on certain Group net profits before tax. We are in the process of appealing these assessments at the TRA Board level. Acacia's substantive
grounds of appeal are, again, based on the correct interpretation of Tanzanian permanent establishment principles and law, relevant to a non-resident English incorporated company. In addition, in Q1 2016 we received a judgement from the Court of Appeal regarding a long standing dispute over tax calculations at Bulyanhulu from 2000-2006. The Court of Appeal was reviewing seven issues initially raised by the TRA in 2012 regarding certain historic tax loss carry forwards and ruled in favour of Bulyanhulu by the Tax Appeals Board in 2013. The TRA appealed against this ruling and in 2014 the Tax Tribunal reversed the decision for all seven issues. Acacia appealed against this judgement and in March 2016 the Court of Appeal found in favour of the TRA in five of the seven issues. The legal route in Tanzania has now been exhausted; however we are considering our options for the next steps. The Court of Appeal ruling does not have a short term cash flow impact but means that Bulyanhulu will be in a tax payable situation approximately one year earlier than previously expected. Acacia is yet to receive a revised tax assessment following the judgement, but has raised further tax provisions of US$69.9 million in order to address the direct impact of the ruling on Bulyanhulu's tax loss carry forwards and the potential impact this may have on the applicability of certain capital deductions for other years and our other mines. The additional tax provisions raised are US$35.1 million relating to Bulyanhulu, US$30.4 million relating to North Mara and US$4.4 million relating to Tulawaka. Total provisions for uncertain tax positions now amount to US$128 million. c) Exploration and development agreements - Mining Licences Pursuant to agreements with the Government of the United Republic of Tanzania, the Group was issued special mining licences for Bulyanhulu, Buzwagi, and North Mara mines and mining licences for building materials at Bulyanhulu and Buzwagi Mines. The agreement requires the Group to pay to the government of Tanzania annual rents of US$5,000 per annum per square kilometre for as long as the Group holds the special mining licences and US$2,000 per annum per square kilometre for so long as the Group holds the mining licences for building materials. The total commitment for 2017 for the remaining special mining licences and mining licences for building materials amount to US$0.62 million. d) Purchase commitments At 31 December 2016, the Group had purchase obligations for supplies and consumables of approximately US$47 million (2015: US$43 million). e) Capital commitments In addition to entering into various operational commitments in the normal course of business, the Group entered into contracts for capital expenditure of approximately US$13 million in 2016 (2015: US$7 million). 20. Related party balances and transactions The Group has related party relationships with entities owned or controlled by Barrick Gold Corporation, which is the ultimate controlling party of the Group. The Company and its subsidiaries, in the ordinary course of business, enter into various sales, purchase and service transactions and other professional services arrangements with others in the Barrick Group. These transactions are under terms that are on normal commercial terms and conditions. These transactions are not considered to be significant. At 31 December 2016 the Group had no loans of a funding nature due to or from related parties (31 December 2015: zero). 21. Post Balance Sheet Events A final dividend of US8.4 cents per share has been proposed, which will result in a total dividend of US10.4 cents per share for 2016. The final dividend is to be proposed at the Annual General Meeting on 20 April 2017 and paid on 31 May 2017 to shareholders on the register on 5 May 2016. The ex-dividend date is 4 May 2016. These financial statements do not reflect this dividend payable. Reserves and Resources Mineral reserves and mineral resources estimates contained in this report have been calculated as at 31 December 2016 in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities, unless otherwise stated. Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definitions were followed for mineral reserves and resources. Calculations have been reviewed, verified (including estimation methodology, sampling, analytical and test data) and compiled by ACACIA personnel under the supervision of ACACIA Qualified Persons: John Haywood, Chief Geologist - Operations, and Samuel Pobee, Chief Advisor Planning and Mine Optimisation. However, the figures stated are estimates and no assurances can be given that the indicated quantities of metal will be produced. In addition, totals stated may not add up due to rounding. Mineral reserves have been calculated using an assumed long-term average gold price of US$1,100.00 per ounce, a silver price of US$15.00 per ounce and a copper price of US$2.50 per pound. Reserve calculations incorporate current and /or expected mine plans and cost levels at each property. Mineral resources at ACACIA mines have been calculated using an assumed long-term average gold price of US$1,400.00 per ounce, a silver price of US$15.00 per ounce and a copper price of US$2.50 per pound. Mineral resources at Acacia exploration properties have been calculated using an assumed long-term average gold price of US$1,500.00 per ounce for Tankoro (50% JV holding with Sarama Resources) and Golden Ridge; whilst Nyanzaga (90% JV holding with OreCorp) is a foreign estimate compiled to JORC Code 2012 and reported above a lower cut-off grade of 1.5g/t. Resources have been estimated using varying cut-off grades, depending on the type of mine or project, its maturity and ore types at each property. Reserve estimates are dynamic and are influenced by changing economic conditions, technical issues, environmental regulations and any other relevant new information and therefore these can vary from year to year. Resource estimates can also change and tend to be influenced mostly by new information pertaining to the understanding of the deposit and secondly the conversion to ore reserves. In addition, estimates of inferred mineral resources may not form the basis of an economic analysis and it cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Therefore, investors are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally mined, or that it will ever be upgraded to a higher category. Likewise, investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be upgraded to mineral reserves. See www.acaciamining.com for Mine Gold Reserves & Resources tables END
(END) Dow Jones Newswires
February 14, 2017 02:00 ET (07:00 GMT)
1 Year Acacia Mining Chart |
1 Month Acacia Mining Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
