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| Name | Symbol | Market | Type |
|---|---|---|---|
| Horizons Enhanced Income Gold Producers ETF | TSX:HEP | Toronto | Exchange Traded Fund |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
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Cluff Gold ("Cluff Gold" or the "Company") (AIM:CLF)(TSX:CFG), the dual AIM/TSX
listed West African focused gold mining company, announces its preliminary
results for the year ended 31 December 2010.
Highlights:
-- Total Production: 94,295 ounces
-- Average Cash Cost achieved: US$883 per ounce
-- Average price of gold sold: US$1,228 per ounce
-- EBITDA growth of US$18.4m to US$22.6m driven by the increased production
and strong gold price
-- Operating cash flow increased by 38% to US$32.2m attributable to both
improved operating efficiencies and an increased gold price, providing
funds for additional capital expenditure and the repayment of debt
-- Closing net cash of US$20.9m compared to net debt of US$3.6m for 2009,
providing a stable base for increased exploration activity in 2011
Baomahun, Sierra Leone:
-- Increase in measured and indicated resource of 27% announced in June
2010 to 1,420,000 ounces grading 2.9 g/t, with an additional 1,030,000
ounces grading 2.6 g/t of inferred resources
-- Preliminary Assessment completed in June 2010 indicating that the
current defined resources can sustain a mine generating 157,000 ounces
per annum over an 8 year initial mine life
-- Seven new high-priority targets identified in a VTEM geophysical survey
over an additional 134 sq. km of licence area
-- 15,000 metres of infill drilling completed since resource update
announced in June 2010
-- Definitive feasibility study due for completion in Q3 2011
-- Additional cost optimisation studies being conducted in parallel to the
feasibility study
Kalsaka, Burkina Faso:
-- 74,073 ounces produced in 2010, a 36% increase
-- Strong production driven by a 36% increase in ore stacked in 2010 to
1.55 Mt at an average grade of 1.6g/t
-- Average cash cost achieved of US$793 per ounce, a slight increase on
2009 due to lower grades in H2 2010
-- Focus on exploration for 2011 to increase resource base
-- 12,000m of reverse circulation drilling completed in H2 2010 has helped
define an expanded 63,000m drilling programme for 2011
Angovia, Cote d'Ivoire:
-- Ore processed has increased 10% to 822,921 tonnes assisted by
improvements to the processing plant
-- 20,222 ounces gold produced (2009: 21,632 ounces) despite the political
turmoil in Cote d'Ivoire during Q4 2010
-- Operation put on care and maintenance in Q1 2011 due to ongoing
political disruptions
-- Renewed focus on the exploration potential at Angovia: a 31,000m RC and
RAB drilling programme is scheduled to commence once drill rigs are
available
-- Initial drilling will focus on four Lateritic targets, similar to
Blangan, where surface geochemical anomalies have been identified
-- RC drilling to focus on significant sulphide potential
Peter Spivey, Chief Executive Officer of Cluff Gold, commented:
"I am pleased with the Company's financial position going into 2011. Our strong
cash position, coupled with our ongoing operational cash generation, allows the
Company to fund the expansion of our exploration activities in 2011. The
Company's asset quality and exploration programme place the Company on a strong
growth platform going forward.
I look forward to a year of continued growth and exploration, targeting the
further enhancement of our current production platform."
Chairman's Statement
Since my last report I have stepped down as Chief Executive in favour of Peter
Spivey. This was effective from January 1st this year and followed after Peter
Spivey had served as Chief Operating Officer of the Company for over a year.
Apart from now being thoroughly familiar with every aspect of our business, he
is based in West Africa which is where your board believes the Chief Executive
needs to be. I remain as Chairman based in London.
One of the governing reasons which supported Mr Spivey's welcome decision to
join this Company was his belief in the potential of the Baomahun project in
Sierra Leone. He is now charged with the task of superintending the transition
of this gold deposit into a producing mine and his experience and leadership
will be absolutely fundamental to attaining that objective. One of the crucial
demands which a development of this scale makes is for additional management and
Peter Spivey and Pete Gardner, our Finance Director, are augmenting their
respective teams.
Your Company has a clear goal of achieving production of 250,000 to 300,000
ounces per year. It is our intention that Cluff will attain this target as an
independent entity through the development of its flagship Baomahun project.
This goal will move closer to reality following the completion of the Baomahun
feasibility study later this year.
Whilst our undoubted priority is the development of Baomahun, we remain
committed to our exploration remit which now encompasses licences in Mali,
Burkina Faso and Cote d'Ivoire in addition to Sierra Leone. We operate the
Kalsaka mine and have a vigorous programme of drilling there with a view to
extending the life of this mine. We have further exploration licences, awarded
to us in 2010, in Burkina Faso and our exploration team has begun the
exploratory process on those licences.
Possibly our most prospective exploration ground is at Angovia in Cote d'Ivoire.
As I write, the small mine at Angovia - which produced gold from an oxide
deposit - is on care and maintenance following the interruption of supplies
resulting from the recent unrest in that country. However, there exists an
underlying sulphide deposit at Angovia, which is presently estimated to contain
an initial measured and indicated resource of 292,000 ounces (169,000 ounces
measured at 1.5g/t Au and 123,000 ounces indicated at 1.7g/t Au). We believe
that the sulphide potential at Angovia is significant, and are planning a major
exploration programme with a view to developing a more substantial mine should
results warrant. The location of a major hydro-electric plant within five
kilometres of Angovia provides the added benefit of low power costs should a
mine be developed.
As a result of our high level of exploration activity and expenditure, the Chief
Executive is looking to establish a larger geology department to ensure the
Company capitalises on the momentum gained in 2010.
There is no gainsaying that large parts of the African Continent are currently
in a condition which renders cogent analysis both difficult and dangerous. On
the one hand, West Africa remains geologically speaking one of the most
prospective areas in the world. This is complemented by Governments which, in
the main, are well aware of and responsive to the importance of foreign
investment and which conduct their affairs within the framework of English or
French law. On the other hand the scourge of inflation, particularly food price
inflation, and the evidence of the possibility of regime change being a solution
has taken hold amongst the population of various countries. We had direct
experience of this recently in Cote d'Ivoire although the situation there is now
improving. There have also been disturbances in Burkina Faso although our
operations have not been affected. But the atmosphere in the Middle East and
larger parts of Africa remains febrile. My colleagues and I feel that we must be
alert to extending our activities to other countries in the region and we are
examining various possibilities now. We also take heart from our collective
experience of working in Africa for many years - although every situation is
unique, there is no substitute for knowledge and familiarity in this type of
environment.
To end on a positive note, notwithstanding the recent volatility, the price of
gold has continued to strengthen since my last report, and my view is that a
robust price environment will remain for the foreseeable future. With high
levels of both personal and public debt throughout the developed world,
inflation is in fact the only clear path to a reduction in absolute terms.
Governments around the world are acting to maintain the supply of money,
creating a fertile environment for the price of all commodities, not least gold.
This will not only be reflected in our cash flow but will strengthen the
underlying value of our business.
J.G. Cluff, Chairman
16 May 2011
Chief Executive's Statement
It is a pleasure to present this, my first report, as Chief Executive of Cluff
Gold plc. Although the period presented pre-dates my elevation to Chief
Executive, I believe it is important that this report clearly sets out our
strategy for the successful development of our assets, which is very much my
main area of focus.
The original decision to join Cluff Gold was an easy one, due to my belief in
the strength of the Company's assets. In particular, I believe that the Baomahun
project has the potential to be world class, and I was drawn to the parallels in
respect of its stage of development with other projects on which I have worked,
the experience from which will help bring it to profitable fruition.
The evolution from an explorer to a developer can be difficult for many
companies. The skills required to manage a successful exploration project are
often quite different from those required for successful development. During the
exploration stage, strategy is dependent on not only the last set of results,
but also the next. The ability to quickly evolve plans in light of recent data
is the most important of all. By comparison, once an ore body is defined, the
key to successful development is putting in place the correct systems and
procedures to manage the operation in an efficient and orderly manner.
When I first arrived at Cluff Gold, a number of the management systems used at
the Company's two operating mines were relatively under-developed. As Chief
Operating Officer my first task was to ensure that these systems evolved quickly
to improve operational efficiency. One such example was supply chain and
inventory management. A new management system has been put in place at both the
Kalsaka and Angovia mines to ensure that critical spare parts are always
available, and regular consumables are purchased from the most appropriate
supplier at the right time. It is these day-to-day operating systems that make
the difference between an efficient, profitable mine, and one that struggles to
maintain production.
In terms of the Company's development to a mid-tier producer we are now at a
pivotal time. The completion of the definitive Baomahun feasibility study due in
Q3 2011 is only the first step in the value realisation from that project. We
are now starting to focus on building the team that can help develop an
efficient and profitable mine. Whilst resources are central to the value
creation from a project, the importance of having the right team in place from
the outset cannot be underestimated.
In terms of our broader strategy, I must stress the importance of exploration.
Due to our strengthened balance sheet we now have the funds to allow our
resource base to grow across all assets. As an unhedged producer of over 70,000
ounces per annum in Burkina Faso, given the current gold price environment, we
will also generate cashflow during 2011 to continue to meet these goals. We are
therefore working to strengthen our exploration teams to ensure that we have the
right personnel in place to deliver on the potential of all our assets.
In my opinion Cluff Gold has an almost unique position. As a producing gold
miner we are very different to earlier stage exploration companies: not only do
we generate the funds internally for our exploration programmes, we also have
personnel across the Group who understand only too well what is required to
successfully run a producing gold mine - and who understand the difficulties in
developing a mine. By comparison, what sets us apart from other producing
companies is the enormous potential for growth at all of our assets.
Our strategy is a simple one:
-- At Baomahun, we aim to build a mine producing in excess of 150,000
ounces of gold per annum, with a view to an early expansion should
exploration results along strike warrant. We are also reviewing a number
of cost optimisation strategies that could deliver a significant cost
benefit.
-- At Kalsaka, we aim to extend the oxide life of the existing heap leach
operation whilst exploring the deeper sulphide potential.
-- At Angovia, we aim to focus primarily on the sulphide potential, adding
to the resources delineated to date.
Together with our new exploration properties in Burkina Faso and Mali, I remain
convinced that the Company has the asset base required to develop into a
mid-tier producer. I look forward to reporting on our progress against these
goals in the future.
Peter Spivey, Chief Executive Officer
16 May 2011
Review of Operations
Baomahun
Baomahun is Cluff Gold's defining development project. The Company's focus at
Baomahun is two-fold: to advance the project to production with the current
resources and to increase the project's resource base by delineating additional
mineralisation along the 12km prospective strike.
The Company made tremendous progress at Baomahun in 2010:
-- In June, the Company announced a 27% resource increase to 1,420,000
ounces in the measured and indicated categories (510,000 ounces measured
at 2.9g/t Au and 910,000 ounces indicated at 2.9g/t Au) and an
additional 1,030,000 ounces (at 2.6g/t Au) in the inferred category(1).
-- A Preliminary Assessment was completed in June for the immediate
resource area with positive results, demonstrating robust economics for
an operating mine based on the currently defined resources. Production
at Baomahun is expected to commence in mid-2013, contributing 157,000
ounces per annum to the Group at an estimated cash cost of US$500/oz.
-- The results of a geophysical VTEM (Versatile Time-Domain
Electromagnetic) survey were announced in December 2010, identifying
seven new high priority drill targets along strike - expanding our
exploration focus to the remainder of the 136 sq. km licence area. Up to
five drill rigs will be operating on site in 2011 focused on these
targets.
Baomahun Resources Tonnes Grade Gold Content
Using 1.0g/t Au cut-off (millions) (g/t Au) (Ounces)
Measured 5.5 2.9 510,000
Indicated 9.6 2.9 910,000
Inferred 12.2 2.6 1,030,000
Baomahun preliminary assessment results -
August 2010 Mt g/t Au Moz
Mineable OP Tonnage (Mt) 12.0 2.7 1.0
Mineable UG Tonnage (Mt) 2.5 4.3 0.3
Total Mineable Tonnage (OP + UG) (Mt) 14.4 2.9 1.4
Metallurgical Recovery (%) 92%
Steady State Throughput (OP + UG) (Mtpa) 1.9
Annual Production (Koz) 157
Total Cash Cost (US$/oz) $ 500
Mine Life (Years) 8
Capex (US$M) $ 195
NPV (10%) (US$M) $ 172
IRR (%) 31%
Progress in line with our strategy continues in 2011. Definitive feasibility
study work is progressing, with completion targeted for Q3 2011. The infill
drilling programme has now been completed, with all major components including
environmental and social studies, engineering plans and mine infrastructure
planning well underway.
Over 15,000 metres of infill drilling have been completed since the resource
update in June 2010. The extensive drilling has established greater continuity
in the mineralisation than previously modelled. Notable drill results
include(2):
-- 16m at 7.1g/t Au from 346m, including 10 m at 10.2g/t Au from 347m
-- 19m at 5.7g/t Au from 611m, including 10 m at 6.9g/t Au from 612m
-- 22m at 4.2g/t Au from 332m, including 11m at 7.0g/t Au from 335m
-- 13m at 5.4g/t Au from 421m, including 3m at 18.7g/t Au from 429m
-- 12m at 8.2g/t Au from 48m, including 5m at 12.8g/t Au from 50m
A new resource block model is currently being developed, which is expected to be
announced during Q2 2011 for inclusion in the feasibility study.
A lower-risk open-pit only mining method is being adopted for the feasibility
study, compared to the combined open pit and underground mining schedule set out
in the Preliminary Assessment.
Additional cost optimisation studies are also being carried out in parallel to
the feasibility study with a view to achieving the best possible economics.
Principally these are:
-- Ongoing metallurgical test work suggests that a processing route
incorporating a flotation stage may be more economically viable. This
could replace the CIP/CIL circuit envisaged in the Preliminary
Assessment and, if successful, would result in a significant reduction
in capital and operating costs. Not only would flotation enable recovery
with a much coarser grind, reducing capital and operating expenditure on
the grinding circuit, it would also remove the capital cost of large
tanks and the high power associated with agitation that is required for
a conventional CIP/CIL process.
Following successful initial results, variability test work
incorporating flotation and a gravity separation circuit is ongoing,
with final results expected to be available in Q3 2011. Whilst the
feasibility study will be based on the conventional CIP/CIL process, if
the results of the variability test work are positive the detailed
processing plant design will be updated in Q4 2011 to incorporate
flotation.
-- The topographical relief and rainfall pattern of the region enables the
provision of hydro-electric power ("HEP") without the need for dam
construction or land inundation. A feasibility study into the
establishment of an HEP station has been commissioned, with 12-month
river flow gauging due to be completed in July 2011. Results to date
suggest that a 20MW run-of-river HEP plant could provide 72% annual
power availability, which would significantly reduce operating cash
costs at current fuel prices compared to the heavy fuel oil power option
currently modelled.
The HEP feasibility study is expected to be completed in Q4 2011, with the HEP
project separately financed from the mine. The heavy fuel oil power plant
envisaged in the feasibility study will be required regardless of the results of
the HEP feasibility study due to the seasonality of river flow and the power
requirements at the height of the dry season. The construction of the heavy fuel
oil power plant will also ensure that the HEP project will not delay
commencement of mine development.
Significant additional exploration potential
With the current resource contained in only 2 sq. km of the 136 sq. km project
area, the Company is excited by the significant exploration potential along
strike to the north at Baomahun. The second branch of the Company's two-fold
strategy at Baomahun is to realise the resource potential along the 12-km
Archaean-age banded iron formation (BIF) strike, with a view to increasing the
project's total resource base.
Prior to 2010 very little focus had been given to the wider potential of the
Baomahun area, but an airborne VTEM Survey for the Baomahun licence area was
undertaken in Q2 2010, with the final interpretation announced in December
2010(3). Using data from the VTEM Survey correlated with known lithologies,
magnetic anomalies and geochemical surface data, seven new drill targets were
identified. All are interpreted as occurring close to surface with strikes and
dips similar to mineralisation in the existing resource area.
Over 1,000 metres of trenching has been carried out over the targets identified,
with initial assay results expected in Q2 2011. An initial 12,000 metres diamond
drilling programme commenced in Q1 2011 to provide first pass drilling for all
targets, with over 3,500 metres drilled to date. Drill core from the first holes
includes sulphide mineralisation known to be associated with gold in the current
resource area. The first assay results are expected in Q2 2011, which will
demonstrate whether these sulphide minerals are also associated with gold in the
new targets. Up to five drill rigs will be operating this year to complete the
initial drilling programme and follow up on any promising mineralised areas
identified.
Kalsaka
As the Company's predominant cash generator, Kalsaka delivered exceptional
performance in 2010 by exceeding the Company's 70,000 ounces production guidance
and generating EBITDA of US$29.1m to fund the Group's activities.
Kalsaka Production Statistics
--------------------------------------------
2010 2009 Difference
--------------------------------------------
Ore mined (t) 1,539,557 1,296,903 242,654 19%
Waste mined (t) 11,135,933 9,303,243 1,832,690 20%
Ore processed (t) 1,550,373 1,135,913 414,460 36%
Average ore head grade (g/t) 1.6 1.7 (0.1) (8%)
Gold production (oz) 74,073 54,428 19,645 36%
Cash costs excl.
Royalties (US$/oz) 793 767 26 3%
Average realised gold
price (US$/oz) 1,221 1,018 203 20%
A total of 74,073 ounces of fine gold was smelted at Kalsaka in 2010,
representing a 36% increase on 2009. This strong performance was driven by the
increase in plant capacity from 1.2Mtpa to 1.6Mtpa, completed in Q4 2009.
A total of 1.55Mt was stacked in 2010, a 36% increase on 2009, representing 97%
of the stacking capacity for the year. This was matched by a strong mining
performance, with a total of 12.7Mt of ore and waste moved, a 20% increase on
2009. The stripping ratio of waste to ore, at 7:1, was in line with that
encountered in 2009. The average grade of ore processed fell 8% in 2010, from
1.7g/t Au to 1.6g/t Au, as lower grade areas of the project were accessed,
particularly in the second half.
The total gold production in H2 2010 was significantly below that achieved in H1
2010 solely due to the geology of the ore body. H1 production, at 40,800 ounces,
was significantly ahead of the forecast annual production rate of 70,000 ounces
as high grade ore, averaging 1.8g/t Au, was processed. As anticipated, grades
fell in the second half, averaging 1.3g/t Au, with a corresponding impact on
gold production. Due to the nature of heap leach operations, with the leach
cycle for processed ore lasting up to four months, the impact of the lower grade
ore is not exactly matched in the production profile.
Kalsaka Production Statistics
--------------------------------------------------
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011
--------------------------------------------------
Ore mined (t) 372,147 406,790 332,842 427,778 466,629
Waste mined (t) 2,283,392 2,706,327 2,845,762 3,300,452 3,549,933
Ore processed (t) 419,512 370,318 321,325 439,218 452,631
Average ore head
grade (g/t) 1.8 1.8 1.4 1.3 1.4
Gold production (oz) 21,481 19,350 15,804 17,438 16,837
Production in Q1 2011 continues to focus on lower grade areas, as originally
modelled, with an average processed grade of 1.4g/t Au. Whilst below the run
rate for the 70,000 ounces annual production guidance, production in Q1 2011 is
above budget. Grades are predicted to strengthen further through the remainder
of 2011, increasing production rates and enabling the Company to achieve the
full year production guidance provided.
Cash costs in 2010, at US$793 per ounce, are 3% higher than achieved in 2009.
This is due to the lower grades off-setting the increase in productivity. Cash
costs are also impacted by the waste to ore ratio, which, along with the falling
grade, increased the cash costs in H2 2010 to US$942 per ounce compared to
US$672 per ounce realised in H1. The higher stripping ratio was caused in part
by new areas opened up for mining in H2, with high waste to ore ratios near
surface.
Costs were also impacted by inflation. Mining costs per tonne rose by 17% in
2010 compared to 2009, whilst processing costs per tonne fell by 15% due to the
economies of scale realised. Fortunately, this impact is more than off-set by
the increase in the gold price in 2010, with the average sale price realised at
Kalsaka increasing 20% to US$1,221 per ounce. At this average price, the Kalsaka
mine generates good cash margins despite the relatively high cash costs. The
strengthening gold price has continued into Q1 2011, with an average realised
gold price for the period of US$1,396 per ounce, further enhancing operating
cash flow from the mine for investment in exploration across the Group.
Exploration
Exploration and reserve development is a primary focus at Kalsaka. As the Group
strengthened its balance sheet in 2010 and project development and expansion
activities were achieved, there has been a renewed focus on exploration
activity.
As at 31 December 2010
Grade
Tonnage (g/t Au) Ounces
Resources at 0.5g/t Au cut off
Oxide & Transitional Measured 2,334,000 1.7 126,000
Indicated 4,481,000 1.5 212,000
------------------------------
Measured & Indicated 6,815,000 1.5 338,000
Inferred 1,019,000 1.3 44,000
Sulphide Measured 153,000 1.6 8,000
Indicated 1,011,000 1.7 55,000
------------------------------
Measured & Indicated 1,164,000 1.7 63,000
Inferred 2,311,000 1.5 113,000
Reserves at 0.5g/t Au cut off
and US$950/oz gold price
Oxide & Transitional Proven 1,497,000 1.8 87,000
Probable 1,941,000 1.6 99,000
------------------------------
Proven & Probable 3,440,000 1.7 186,000
All available exploration data was analysed in H1 2010 and the Kalsaka
exploration goals were defined as:
-- To increase the current life of the mine through the delineation of
additional oxide resources.
-- To aggressively follow up the strong evidence of the potential for a
larger sulphide resource beneath the known oxide resources.
An exploration programme commenced in H2 initially focused on trenching,
geophysics and soil sampling together with a total of 12,000 metres of reverse
circulation drilling. The results from this programme have helped define an
expanded 63,000 metre drilling programme for 2011.
Oxide targets include the Zoungwa prospect along strike from the existing K-zone
pit as well as mineralised splays between the K-Zone and Goungre Shears.
Drilling results announced in November 2010 included intercepts of 16 metres
grading 1.82g/t Au and 7 metres grading 2.36g/t Au in the oxide zone at
Zoungwa(4). Two drill rigs are currently on site and further drilling results
are anticipated.
The ongoing drilling programme has also provided evidence of significant
sulphide mineralisation underlying the K-Zone and the East Pit, as demonstrated
by an intercept of 15 metres grading 7.44g/t Au beneath the existing K-zone pit
announced in October 2010(5).
The Company is highly encouraged by the results to date and believes that the
remainder of the drilling programme will help to demonstrate the potential of
the asset. A US$7m exploration budget has been allocated to Kalsaka for 2011.
In August 2010, the Company was also awarded four additional licences located in
prospective Birimian ground in eastern Burkina Faso, demonstrating the strength
of the Company's relationship with the Burkina Faso government. These licence
areas have a similar geological setting to the Samira Gold Mine in Niger, which
produces on average 60,400 ounces per annum(6). The licences were selected from
a portfolio of available areas following a technical site visit. The areas
demonstrate strong exploration potential evidenced by historical stream sediment
survey results and gold-in-soil anomalies. An initial exploration budget
totalling US$0.7m has been set aside in 2011 for regional work across these
licences.
Angovia
Located in an area of highly prospective Birimian greenstone belt terrain in
Cote d'Ivoire, the Angovia project represents an exciting exploration
opportunity for the Group. The Company remains optimistic on the project's
exploration potential with a long-term goal of developing a mine capable of
exploiting sulphide resources.
The current oxide only heap leach operation produced 20,222 ounces in 2010, 7%
below the 2009 total and significantly below the Company's expectations. The
problems at Angovia included the impact of the deteriorating political
environment towards the end of the year as well as operational challenges
evident during H2 2010.
Angovia Production Statistics
---------------------------------------
2010 2009 Difference
---------------------------------------
Ore mined (t) 903,301 880,538 22,763 3%
Waste mined (t) 3,343,923 5,233,896 (1,889,973) (36%)
Ore processed (t) 811,921 738,832 73,089 10%
Average ore head grade (g/t) 0.9 1.2 (0.3) (23%)
Gold production (oz) 20,222 21,632 (1,410) (7%)
Cash costs excl. royalties (US$/oz) 1212 1113 99 9%
Average realised gold price (US$/oz) 1,218 1,121 97 9%
Total ore processed in 2010 increased by 10%, boosted by increased operating
efficiencies including the acquisition of a new stacker, and an upgrade to the
agglomeration drum. Ore mining volumes also improved year on year, helped by a
significant reduction in the waste to ore stripping ratio following an effective
catch up on waste in 2009.
The under-performance stemmed from the low grades processed in 2010, 23% lower
than the average in 2009 and also below the average reserve grade. This is due
to the nature of the Angovia ore body, where the majority of high grade ore is
associated with hard quartz vein and transitional material, which cannot be
processed without crushing. A crusher was brought on site in August 2010 to
allow the processing of this material, but its commissioning was delayed by an
unusually heavy and prolonged wet season followed by supply disruptions brought
on by the political unrest.
While higher grade ore from Blangan, a lateritic deposit in the project area,
boosted grades in H1 2010, average grades in H2 declined to 0.7g/t Au due to the
expected higher grade material not being processed in significant volumes.
As a result of the low grades, operating cash costs for the year increased by 9%
to US$1,212 per ounce (excluding royalties). The average gold price achieved
also increased 9% to US$1,218 per ounce, with the result that the mine operated
at an almost break even basis over the year (after royalties).
Angovia Production Statistics
---------------------------------------------
Q1 2011
Q1 2010 Q2 2010 Q3 2010 Q4 2010 (1)
---------------------------------------------
Ore mined (t) 262,340 223,662 257,103 160,196 176,418
Waste mined (t) 985,654 721,479 995,628 641,162 878,233
Ore processed (t) 246,330 174,105 216,068 175,418 139,841
Average ore head grade (g/t) 1.1 0.9 0.7 0.7 0.7
Gold production (oz) 6,708 4,577 4,567 4,370 2,906
1. The operation was put on care and maintenance on 7 March 2011
Production in Q1 2011 again fell short of expectations primarily due to the
political disruptions. The harder, high grade material, continued to be
unavailable due to a lack of explosives for drill and blast activities.
Disruptions to other consumables reduced stacking rates and the operation was
eventually put on care and maintenance in March 2011 due to the impediments to
operating in the country, including the closure of the banking system.
Once operations can resume at site, the initial focus will be to resume
processing activities to recover gold from material in the existing stockpiles
and leach pad. Exploration activities will resume with a view to delineating
additional resources in laterite targets similar to the Blangan deposit - a high
grade and low strip ratio deposit that contained approximately 24,000 ounces at
1.7g/t Au that was defined in Q3 2009 and mined between Q4 2009 and Q1 2010.
Full mining operations will resume only once the directors are confident that
these can be conducted safely and profitably.
Exploration
The long term future of the Angovia mine rests with the significant exploration
potential in the project area. In the near term, the Company is focused on
defining additional oxide targets, with a 31,000 metre RC and RAB drilling
programme planned once a drill rig is available. Drilling will initially be
focused on four lateritic targets similar to Blangan where surface geochemical
anomalies have been identified.
More importantly, the Company believes that the project's true potential lies in
its considerable sulphide mineralisation, as demonstrated by drill results of up
to 30 metres at 3.64g/t Au below the current pit. To date, 292,000 ounces of
sulphide resources (at 1.6g/t Au) have been delineated in the measured &
indicated categories (169,000 ounces at 1.5g/t Au in measured and 123,000 ounces
at 1.7g/t Au in indicated categories). Due to the relatively shallow depth of
weathering at Angovia, together with the close availability of hydro-electric
power, the Company considers that a conventional CIL processing plant could be
developed at Angovia to fully exploit the resource base with a lower resource
hurdle than at other locations.
As at 31 December 2010
Grade
Tonnage (g/t Au) Ounces
Resources at 0.5g/t Au cut off
Oxide & Transitional Measured 3,291,000 1.2 128,000
Indicated 1,289,000 1.5 64,000
------------------------------
Measured & Indicated 4,580,000 1.3 192,000
Inferred 801,000 1.5 38,000
Sulphide Measured 3,421,000 1.5 169,000
Indicated 2,195,000 1.7 123,000
------------------------------
Measured & Indicated 5,616,000 1.6 292,000
Inferred 506,000 1.5 25,000
Reserves at 0.5g/t Au cut off and
US$1000/oz gold price(1)
Oxide & Transitional Proven 1,600,000 1.0 50,000
Probable 500,000 1.9 31,000
------------------------------
Proven & Probable 2,100,000 1.2 81,000
1. With the exception of Angovia 2, which was modelled on a US$1,000/oz pit
shell and represents 41% of total reserves
Further drilling will also target Kongonza, where 75,100 ounces have been
delineated in the measured & indicated categories to date (with 48,622 ounces at
1.25g/t Au in measured, and 26,478 ounces at 1.74g/t Au in indicated categories)
with a further 12,792 ounces in the inferred category (at 1.47g/t Au) (included
in the resource tables set out). A further 3,500 metres of RC drilling has been
planned for this area to target continuity along strike and to test a
sub-parallel corridor suggested by a recent structural interpretation.
Finance
Improved operational cash flow
The most important financial metric for the Company is the cash generated from
operations. This funds the investment required to fulfil our strategy: to
complete the Baomahun feasibility study; expand the resource base at Baomahun by
exploring along strike; extend the life of Kalsaka mine through exploration; and
explore at our other operations in Burkina Faso, Cote d'Ivoire and Mali.
The 2010 results demonstrate a significant improvement in cash generation, with
the balance sheet position increasing from a net debt of US$3.6m to net cash of
US$20.9m over the course of the year. This turnaround in cash generation was
driven by both improved operating efficiencies and the strengthening gold price.
In 2009, our operations utilised US$8.8 million of cash, which together with
US$5.2 million of capital expenditure more than fully expended the US$13.0
million raised from equity shareholders. Not only was this unsustainable, the
nature of the cash flows was such that capital expenditure on both exploration
and mine development was constrained.
In 2010 our operations have generated US$23.4 million of cash inflow,
representing a US$32.2 million increase compared to 2009. This has more than
funded US$12.0 million of capital expenditure and a US$6.0 million repayment of
debt - the last of which will also save a further US$1.5 million of finance
charges that were paid in 2010.
Accordingly, the US$15.6 million raised in 2010, at a premium to market, has
allowed us to significantly increase our exploration programmes across the Group
without jeopardising the funding required for the Baomahun feasibility study.
Accordingly, a US$20 million budget has been allocated to exploration in 2011
over and above the US$12 million required for the Baomahun feasibility study.
Importantly, our US$20.9 million cash buffer at 31 December 2010 allows us to
plan our exploration programmes on a longer term basis. As exploration results
are the cornerstone for the future growth of the business, this change in our
operating cash flow is extremely welcome.
Strong operational performance
Internal management reports focus on EBITDA, as set out in note 4 to the
preliminary statement. This is an approximate measure of the cash generated from
each business unit before changes in working capital, and is set out for both
the current and prior years on a consistent basis excluding the impact of the
commissioning phase of operations in 2009.
On this basis, the financial performance for the year is strong. Segmental
turnover has increased by 49%, driven by a 25% increase in production and a near
20% increase in the average realised price of gold sold. At US$1,220 per ounce,
the latter has shown significant improvement in Q1 2011, with a further 14%
increase to US$1,395 per ounce.
EBITDA has increased by over 400%, or US$22.6 million in 2010 due to the
increase in turnover far outstripping the increase in costs. Overall, cash costs
per ounce increased by 2% in 2010 compared to 2009. Average cash costs will be
reduced in 2011 due to the temporary suspension of production at Angovia, and
further efforts are being made to contain cash costs at Kalsaka. A fuller
discussion of cash costs at each site is set out within the operational analysis
presented previously.
The financial performance at Kalsaka has been particularly pleasing, with a 68%
increase in turnover and 170% increase in EBITDA to US$29.1 million for the
operation in 2010. This supports our assertion that the current Kalsaka mine is
fulfilling its remit for the Group's overall strategy - to fund our exploration
programmes to deliver growth across all assets.
The statutory income statement continues to show an overall loss for 2010 of
US$0.05 per share. This can be expected as the Group is dominated by Baomahun, a
pre-production asset. Although direct costs associated with Baomahun are
presently capitalised, support costs, including the strengthening of the Group's
management team in preparation for the development of Baomahun, are included in
the income statement. Relatively short reserve lives also result in high levels
of (non-cash) depreciation and amortisation, which further erodes reported
earnings. As previously discussed these are being aggressively addressed through
exploration efforts.
Building a strong asset base
By far the most important assets of the Group are its reserves and resources.
These are not reflected on a financial balance sheet except as capitalised
exploration and acquisition expenditures, and rightly so, as their true market
valuation is exceptionally judgemental. The costs associated with the definition
of our resources at Baomahun are included within intangible assets - at 31
December 2010 the cash costs capitalised averaged US$9.20 for each resource
ounce defined across all categories.
One of the key metrics for comparing the valuation of resource companies often
set out by analysts is enterprise value per resource ounce. As the majority of
the Company's resources are at Baomahun, we look forward to the completion of
the feasibility study in 2011, which we believe will assist the market in
understanding the true value of these resources.
Capital expenditure in 2010 increased by 14% to US$12.5 million, although
changes in the type of expenditure reflect a more important factor. In 2009, 52%
related to investments at Kalsaka, including the mobilisation of a new mining
fleet and upgrades to the plant required to put the operation on a surer
footing. This type of expenditure dropped to US$2.6 million in 2010, primarily
focused on additional leach pad space for mine life extension. At Baomahun,
capital expenditure increased by 84% to US$6.2 million in 2010, 50% of the total
capital expenditure in the year, reflecting increased activity at site as the
project moves towards feasibility.
In respect of working capital, delays in the repayment of VAT in Burkina Faso
and Cote d'Ivoire were highlighted as problems in 2009. In Burkina Faso,
repayments have now commenced, with the total recoverable amount at 31 December
2010 reducing slightly compared to the prior year. Although repayments have not
been received from Cote d'Ivoire, with the asset continuing to be treated as
recoverable in more than one year, payments of VAT have now ceased under an
updated mining convention, so the problem has been capped.
Finally, it is pleasing to note that the Company is debt free at 31 December
2010, with the US$6 million working capital facility from RMB Australia Holdings
Limited fully repaid in 2010. Whilst there will be a significant financing
requirement for the Baomahun mine development, the options open to the Company
for this remain varied. With a strengthening balance sheet in 2011, together
with our desire to increase resources across the Group, we aim to deliver this
financing with the minimum dilution to existing shareholders.
This News Release includes certain "forward-looking information" within the
meaning of applicable Canadian securities legislation. All statements other than
statements of historical fact, included in this release, including, without
limitation, the positioning of the Company for future success, statements
regarding potential future production, exploration and drilling results at
Angovia, Kalsaka and Baomahun, and future capital plans and objectives of Cluff
Gold, are forward-looking information that involve various risks and
uncertainties. There can be no assurance that such statements will prove to be
accurate and actual results and future events could differ materially from those
anticipated in such statements. Important factors that could cause actual
results to differ materially from Cluff Gold's expectations include, among
others, risks related to international operations, the actual results of current
exploration and drilling activities, changes in project parameters as plans
continue to be refined as well as future price of gold. Although Cluff Gold has
attempted to identify important factors that could cause actual results to
differ materially, there may be other factors that cause results not to be as
anticipated, estimated or intended. There can be no assurance that such
statements will prove to be accurate as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements. Cluff
Gold does not undertake to update any forward-looking statements that are
included herein, except in accordance with applicable securities laws.
In this New Release the term "cash operating cost" is used as a performance
measure. Cash operating cost is used on a per ounce of gold basis. Cash
operating cost per ounce is equivalent to mining operations expenses for the
period divided by the number of ounces of gold sold during the period.
Andrew Asante, (M.Sc., AusIMM), Resource Manager for West Africa and a
"qualified person" as such term is defined in National Instrument 43-101, has
reviewed the technical contents of this announcement. Mr. Asante has verified
the exploration data disclosed in this announcement, including sampling,
analytical and test data underlying the information contained herein.
Cluff Gold plc is a "Designated Foreign Issuer" in accordance with National
Instrument 71-102 - Continuous Disclosure and Other Exemptions Relating to
Foreign Issuers ("NI 71-102") in Canada, subject to the foreign regulatory
requirements of a foreign regulatory authority, namely, AIM Market of the London
Stock Exchange.
For Baomahun, detailed geology and other exploration information can be found in
the Company's report Technical Review of the Baomahun Gold Exploration Project,
Sierra Leone dated 12 August 2010, made available on the Company's website and
on SEDAR.
For Kalsaka, detailed geology, descriptions of the various exploration prospects
at Kalsaka, and other exploration information can be found in the Company's
NI43-101 report Technical Review of Kalsaka Gold Mine, Burkina Faso, as prepared
by SRK Consulting, dated October 2008 and available on SEDAR. Resource
estimation has been subsequently updated for production changes.
For Angovia, detailed geology, descriptions of Kongonza and other exploration
prospects at Angovia, and other exploration information can be found in the
Company's NI43-101 report Technical Review of Angovia Gold Mine, Mount Yaore,
Cote d'Ivoire, as prepared by SRK Consulting, dated October 2008 and available
on SEDAR. Resource estimation has been subsequently updated for production and
exploration changes.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2010
Notes 2010 2009
US$000 US$000
Continuing operations
Revenue 115,804 39,659
Cost of sales (94,176) (35,085)
-----------------------
Gross profit 21,628 4,574
General and administrative expenses (7,684) (7,533)
Other operating costs (12,963) (8,893)
Exploration expenses (519) (656)
Impairment of mining properties - (21,914)
(Loss)/profit on disposal of property, plant &
equipment (12) 7
-----------------------
Operating profit/(loss) 450 (34,415)
Investment income 349 727
Finance costs (1,775) (1,807)
-----------------------
Loss before taxation (976) (35,495)
Income tax (3,462) 1,228
-----------------------
Loss for the year (4,438) (34,267)
-----------------------
Attributable to:
Equity shareholders of the parent company (6,072) (34,267)
Non-controlling interests 1,634 -
-----------------------
Loss for the year (4,438) (34,267)
-----------------------
Other comprehensive income
Exchange differences on translating foreign
operations (1,309) 1,974
-----------------------
Other comprehensive income for the year, net of
taxation (1,309) 1,974
-----------------------
Total comprehensive income for the year (5,747) (32,293)
-----------------------
-----------------------
Attributable to:
Equity shareholders of the parent company (7,759) (32,293)
Non-controlling interests 2,012 -
-----------------------
(5,747) (32,293)
-----------------------
-----------------------
Loss per share
Basic and diluted (cents per share) 5 (4.92) (30.25)
-----------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2010
Notes 2010 2009
US$000 US$000
ASSETS
NON-CURRENT ASSETS
Intangible assets 6 48,351 44,695
Property, plant and equipment 7 27,885 39,485
Other receivables 2,324 2,043
Deferred tax asset 693 1,228
---------------------------
Total non-current assets 79,253 87,451
---------------------------
CURRENT ASSETS
Other receivables 9,074 8,357
Inventories 12,767 15,790
Cash and cash equivalents 20,907 2,273
---------------------------
Total current assets 42,748 26,420
---------------------------
TOTAL ASSETS 122,001 113,871
---------------------------
---------------------------
CAPITAL AND RESERVES
Share capital 2,365 2,224
Share premium 117,410 101,993
Merger reserve 15,107 15,107
Share option reserve 2,556 3,952
Currency translation reserve 987 2,674
Accumulated losses (43,431) (39,643)
---------------------------
TOTAL EQUITY ATTRIBUTABLE TO THE PARENT 94,994 86,307
Non-controlling interests 2,012 -
---------------------------
TOTAL EQUITY 97,006 86,307
---------------------------
---------------------------
NON-CURRENT LIABILITIES
Provisions 6,059 4,578
---------------------------
Total non-current liabilities 6,059 4,578
---------------------------
CURRENT LIABILITIES
Trade and other payables 15,920 17,117
Corporation tax 3,016 -
Borrowings - 5,869
---------------------------
Total current liabilities 18,936 22,986
---------------------------
TOTAL LIABILITIES 24,995 27,564
---------------------------
TOTAL EQUITY AND LIABILITIES 122,001 113,871
---------------------------
---------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2010
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share Currency
Share Share Merger option translation
capital premium reserve reserve reserve
US$000 US$000 US$000 US$000 US$000
BALANCE AT 1 JANUARY
2009 1,841 89,407 15,107 3,152 700
Loss for the year - - - - -
Exchange differences
on translating
foreign operations - - - - 1,974
------------------------------------------------------
Total comprehensive
income for the year - - - - 1,974
------------------------------------------------------
Issue of ordinary
share capital 383 13,548 - - -
Share issue costs - (962) - - -
Share option charge - - - 800 -
------------------------------------------------------
BALANCE AT 31 DECEMBER
2009 2,224 101,993 15,107 3,952 2,674
Loss for the year - - - - -
Exchange differences
on translating
foreign operations - - - - (1,687)
------------------------------------------------------
Total comprehensive
income for the year - - - - (1,687)
Issue of ordinary
share capital 141 15,423 - - -
Share issue costs - (6) - - -
Share option charge - - 888 -
Reserve transfer - - - (2,284) -
------------------------------------------------------
BALANCE AT 31 DECEMBER
2010 2,365 117,410 15,107 2,556 987
------------------------------------------------------
------------------------------------------------------
Non-
Accumulated controlling Total
losses Sub-total interests equity
US$000 US$000 US$000 US$000
BALANCE AT 1 JANUARY
2009 (5,376) 104,831 - 104,831
Loss for the year (34,267) (34,267) - (34,267)
Exchange differences
on translating
foreign operations - 1,974 - 1,974
------------------------------------------------------
Total comprehensive
income for the year (34,267) (32,293) - (32,293)
------------------------------------------------------
Issue of ordinary
share capital - 13,931 - 13,931
Share issue costs - (962) - (962)
Share option charge - 800 - 800
------------------------------------------------------
BALANCE AT 31 DECEMBER
2009 (39,643) 86,307 - 86,307
Loss for the year (6,072) (6,072) 1,634 (4,438)
Exchange differences
on translating
foreign operations - (1,687) 378 (1,309)
------------------------------------------------------
Total comprehensive
income for the year (6,072) (7,759) 2,012 (5,747)
Issue of ordinary
share capital - 15,564 - 15,564
Share issue costs - (6) - (6)
Share option charge - 888 - 888
Reserve transfer 2,284 - - -
------------------------------------------------------
BALANCE AT 31 DECEMBER
2010 (43,431) 94,994 2,012 97,006
------------------------------------------------------
------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2010
2010 2009
US$000 US$000
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
Operating profit/(loss) for the year 450 (34,415)
Depreciation 19,858 7,385
Impairment of mineral properties - 21,914
(Decrease)/increase in trade and other payables (856) 3,545
Increase in other receivables (1,698) (7,132)
Decrease/(increase) in inventories 2,994 (3,108)
Increase in provisions 1,481 248
Share option charge 888 742
Exploration costs written off 7 621
Loss/(profit) on disposal of property, plant &
equipment 5 (7)
Exchange loss 315 1,391
---------------------------
NET CASH FLOWS FROM/(USED IN) OPERATING
ACTIVITIES 23,444 (8,816)
---------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Interest receivable 46 23
Interest payable (1,775) (1,035)
Purchase of property, plant and equipment (6,317) (2,290)
Purchase of intangible assets (5,718) (2,920)
Proceeds from sale of property, plant and
equipment - 15
---------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (13,764) (6,207)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of share capital 15,564 13,931
Issue costs paid (6) (962)
Repayment of borrowings (6,000) -
---------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 9,558 12,969
---------------------------
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS 19,238 (2,054)
Cash and cash equivalents at start of period 2,273 4,416
Exchange losses on cash and cash equivalents (604) (89)
---------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR 20,907 2,273
---------------------------
---------------------------
CASH AND CASH EQUIVALENTS COMPRISE
---------------------------
Cash at bank 20,907 2,273
---------------------------
---------------------------
NOTES TO THE PRELIMINARY ANNOUNCEMENT
For the year ended 31 December 2010
1 Financial statements
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2010 or 31 December 2009.
Statutory accounts for 31 December 2009 have been delivered to the Registrar of
Companies and those for 31 December 2010 will be delivered in due course. The
auditors have reported on those accounts; their report was unqualified and did
not contain statements under section 498 (2) or (3) of the Companies Act 2006.
2 Basis of preparation and accounting policies
Whilst, the financial information included in this preliminary announcement has
been presented in accordance with International Financial Reporting Standards as
adopted by the EU (IFRS), this announcement in itself does not constitute full
compliance with IFRS. Details of the accounting policies are those set out in
the annual report for the year ended 31 December 2009. These accounting policies
have remained unchanged for the financial year ended 31 December 2010 except for
those new standards issued and adopted in the year.
3 Dividends
The directors do not recommend the payment of a dividend (2009: nil).
4 Segment reporting
Operating segments have been identified on the basis of internal reports about
components of the Group that are regularly reviewed by the Group's chief
operating decision maker. The Group's chief operating decision maker is
considered by management to be the board of directors. The operating segments
included in internal reports are determined on the basis of their significance
to the Group. In particular, operating mines are reported as separate segments
together with exploration projects that have significant capitalised
expenditure. An analysis of the Group's business segments is set out below.
All other
Kalsaka Angovia Baomahun segments Total
US$000 US$000 US$000 US$000 US$000
Year ended 31
December 2010
External revenue -
sale of gold 90,643 24,208 - - 114,851
Direct costs of
production (53,850) (20,984) - - (74,834)
Other operating and
administrative
costs (7,687) (4,100) - (5,604) (17,391)
---------------------------------------------------------
Segmental result -
EBITDA 29,106 (876) - (5,604) 22,626
---------------------------------------------------------
---------------------------------------------------------
Total assets 49,008 25,636 44,552 14,394 133,590
Capital expenditure 2,642 3,608 6,179 27 12,456
---------------------------------------------------------
---------------------------------------------------------
All other
Kalsaka Angovia Baomahun segments Total
US$000 US$000 US$000 US$000 US$000
Year ended 31
December 2009
External revenue -
sale of gold 54,107 22,823 - - 76,930
Direct costs of
production (38,155) (21,006) - - (59,161)
Other operating and
administrative
costs (5,162) (3,752) - (4,594) (13,508)
---------------------------------------------------------
Segmental result -
EBITDA 10,790 (1,935) - (4,594) 4,261
---------------------------------------------------------
---------------------------------------------------------
Total assets 56,956 27,066 38,732 2,031 124,785
Capital expenditure 5,700 1,844 3,353 34 10,931
---------------------------------------------------------
---------------------------------------------------------
In 2010 the Group had one customer (2009: one).
The segmental result reported represents earnings before interest, tax,
depreciation and amortisation (EBITDA) and excludes share option charges, which
is the measure of segmental profit regularly reported to the board of directors.
The accounting policies of the reporting segments are different from the Group's
accounting policies as follows:
-- Pre-commissioning income and expenditure at operating mines is not
capitalised in the segmental results.
-- Income is accrued for gold bullion on hand at the period end in
segmental results and, accordingly, no stock is recognised for this
item.
-- The depreciation charge against segmental assets is based on a different
total asset cost compared to the statutory accounts due, to the fact
that income and expenditure is not capitalised during the commissioning
period. In addition, the total asset cost is depreciated from the
commencement of mining operations.
A reconciliation of segmental revenue to the Statement of Comprehensive Income
is as follows:
2010 2009
US$000 US$000
Revenue for reportable segments 114,851 76,930
Revenue capitalised during commissioning phase of
mining operations - (34,650)
Change in accrued revenue for gold bullion stock at
year-end 953 (2,621)
-------------------------
Revenue for Statement of Comprehensive Income 115,804 39,659
-------------------------
-------------------------
A reconciliation of EBITDA to loss before taxation is as follows:
2010 2009
US$000 US$000
EBITDA for reportable segments 22,626 4,261
Depreciation and amortisation (19,858) (7,385)
Impairment of non-current assets - (21,914)
Share based payments (888) (742)
Net interest payable (1,729) (1,080)
(Loss)/profit on disposal of fixed assets (12) 7
EBITDA capitalised during commissioning phase of
mining operations - (5,583)
Change in accrued revenue for gold bullion stock
at year-end 436 (1,047)
Exploration costs written-off (520) (621)
Exchange rate variance 303 (1,391)
VAT provided in year (1,334) -
---------------------------
Loss before taxation (976) (35,495)
---------------------------
---------------------------
A reconciliation of segmental assets to the Statement of Financial Position is
as follows:
2010 2009
US$000 US$000
Total assets for reportable segments 133,590 124,785
EBITDA capitalised during commissioning phase of
mining operations 5,962 5,962
Differences in depreciation and amortisation 4,799 6,085
Impairment of non-current assets (21,914) (21,914)
Accrued revenue for gold bullion stock at year-
end (436) (1,047)
---------------------------
Total assets 122,001 113,871
---------------------------
---------------------------
A reconciliation of segmental capital expenditure to notes 6 and 7 is as follows:
2010 2009
US$000 US$000
Capital expenditure for reportable segments 12,456 10,931
EBITDA capitalised during commissioning phase of
mining operations - (5,583)
-------------------------
Capital expenditure 12,456 5,348
-------------------------
-------------------------
Geographic information
Burkina Cote Sierra
Faso d'Ivoire Leone UK Other Total
US$000 US$000 US$000 US$000 US$000 US$000
Year ended 31 December
2010
Revenue 90,281 25,523 - - - 115,804
Non-current assets 22,167 12,816 44,173 94 3 79,253
------------------------------------------------------
------------------------------------------------------
Year ended 31 December
2009
Revenue 28,728 10,931 - - - 39,659
Non-current assets 33,640 15,048 38,599 122 42 87,451
------------------------------------------------------
------------------------------------------------------
5 Loss per share
The calculation of the basic and diluted earnings 2010 2009
per share is based on the following data: US$000 US$000
Losses for the purposes of earnings per share
(net loss for the year attributable to equity
holders of the parent) (6,072) (34,267)
Number of shares
Weighted average number of ordinary shares for
the purposes of earnings per share ('000's) 123,415 113,280
---------------------------
---------------------------
There is no difference between the diluted loss per share and the basic loss per
share presented. Due to the loss incurred in the year the effect of the share
options in issue is anti-dilutive.
6 Intangible assets
Deferred
Exploration and exploration and
mining rights evaluation costs Total
US$000 US$000 US$000
COST
At 1 January 2009 30,223 12,848 43,071
Additions - 2,988 2,988
Exploration costs written off - (621) (621)
Exchange differences - 1,439 1,439
-----------------------------------------------
At 31 December 2009 30,223 16,654 46,877
Additions - 6,078 6,078
Exploration costs written off - (7) (7)
Exchange differences - (483) (483)
-----------------------------------------------
At 31 December 2010 30,223 22,242 52,465
-----------------------------------------------
AMORTISATION
At 1 January 2009 - - -
Charge for the year 1,034 - 1,034
Impairment charge 1,148 - 1,148
-----------------------------------------------
At 31 December 2009 2,182 - 2,182
Charge for the year 1,932 - 1,932
-----------------------------------------------
At 31 December 2010 4,114 - 4,114
-----------------------------------------------
NET BOOK VALUE
At 31 December 2010 26,109 22,242 48,351
-----------------------------------------------
-----------------------------------------------
At 31 December 2009 28,041 16,654 44,695
-----------------------------------------------
-----------------------------------------------
At 1 January 2009 30,223 12,848 43,071
-----------------------------------------------
-----------------------------------------------
Included within Exploration and mining rights is an amount of US$21.8 million in
relation to the Baomahun Gold Project. This amount is recoverable through the
exploitation of the project.
In addition, the Group holds two mining licences relating to the Kalsaka and
Angovia Gold Mines. The value assigned to these licences on issue amounted to
US$6.0 million and US$2.4 million respectively.
7 Property, plant & equipment
Mining,
development and Motor vehicles,
associated office equipment,
property, plant fixtures &
and equipment cost computers Total
US$000 US$000 US$000
COST
At 1 January 2009 77,373 2,062 79,435
Additions, net of results
from commissioning
phase(1) 1,521 839 2,360
Transfer to
inventories(2) (11,621) - (11,621)
Transfer to trade and
other receivables(2) (1,189) - (1,189)
Disposals - (9) (9)
Transfer between asset
categories(3) (1,047) 1,047 -
Exchange differences 10 60 70
---------------------------------------------------
At 31 December 2009 65,047 3,999 69,046
Additions 5,568 810 6,378
Disposals - (60) (60)
Exchange differences (11) (51) (62)
---------------------------------------------------
At 31 December 2010 70,604 4,698 75,302
---------------------------------------------------
---------------------------------------------------
DEPRECIATION
At 1 January 2009 - 1,183 1,183
Charge for the year 6,809 761 7,570
Impairment charge(4) 20,766 - 20,766
Exchange differences - 42 42
---------------------------------------------------
At 31 December 2009 27,575 1,986 29,561
Charge for the year 16,865 1,093 17,958
Disposals - (55) (55)
Exchange differences (1) (46) (47)
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At 31 December 2010 44,439 2,978 47,417
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NET BOOK VALUE
At 31 December 2010 26,165 1,720 27,885
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At 31 December 2009 37,472 2,013 39,485
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At 1 January 2009 77,373 879 78,252
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1. In accordance with industry practice all costs and revenues during the
commissioning phase of the operation that are directly attributable to
the operations are capitalised.
2. At 30 June 2009 the commissioning of the Kalsaka mine in Burkina Faso
was completed and at 30 September 2009 the commissioning of the Angovia
mine in Cote d'Ivoire was completed. Accordingly, amounts relating to
the inventory of mined ore and recoverable taxes relating to the mine
have been transferred from mining development costs to current assets
during the period.
3. During 2009 certain of the Group's property, plant and equipment
located at the Kalsaka and Angovia mines have been reclassified from
mine development costs to equipment as the directors consider that this
is a more appropriate asset classification. The prior period has not
been adjusted for this change in accounting policy on the basis that
this change would have no effect on the total value of property, plant
and equipment or cumulative depreciation thereon at 1 January 2008 or
31 December 2008.
4. The impairment charge was recognised in respect of the Group's Angovia
mine, which is a cash generating unit identified as a reportable
segment under IFRS 8. Indirect taxes recoverable in Cote d'Ivoire has
been excluded from the impairment loss calculation for the Angovia mine
as this balance will be recovered in a different manner from the other
net assets. A separate impairment provision has been made against
indirect taxes recoverable. Full details of the impairment charge
totalling $21.9 million recognised in respect of the Angovia mine in
2009 are given in the prior year's annual report.
Due to the losses incurred at Angovia in 2010, a further impairment
review was carried out for this cash generating unit, excluding
indirect recoverable taxes, at 31 December 2010. The recoverable amount
was calculated by reference to both the value in use and fair value
less costs to sell.
-- Value in use was calculated by reference to a life of mine economic
model using the currently defined reserves set out in this annual report
at a US$1,300 gold price and a 25% discount rate. On the basis that the
mine was able to continue operating, and that the supply disruptions
experienced during the political crisis were resolved, this demonstrated
that no further impairment was required. A high discount rate was used
to reflect the uncertainty in respect of the political crisis.
-- Fair value less costs to sell was calculated by reference to the value
per resource ounce paid by investors for similar assets. Direct
comparison is difficult due to the unique political situation in Cote
d'Ivoire. However, applying a suitable discount to comparable resources
based on the heightened political risk suggested that no further
impairment was required.
-- Further consideration was given to the recoverable amount should the
political situation in Cote d'Ivoire not be resolved. The Company has
existing provisions in place to protect against the loss of the project
as a result of war and political violence, including the risk of being
forced to abandon the project, which indicated that no further
impairment was required.
8 Contingent liabilities
In February 2011 the Company received a proposal for additional costs sustained
by the mining contractor at the Angovia Mine totalling US$9.2m. The directors
believe that the majority of the proposal is unfounded. The terms of the
contract clearly state that the rates set out therein shall apply regardless of
the difficulty in performing the works under the contract, such that the
majority of the additional costs claimed cannot be recovered under the contract.
A provision of US$2.7m is included in the financial statements, which, in the
opinion of the directors, is the maximum amount payable under the proposal.
9 Post balance sheet events
On 7 March 2011, following significant unrest in Cote d'Ivoire, the Group
decided to temporarily suspend operations at its Angovia mine. Following a
detailed review by management this temporary situation was not considered to
materially impact upon the carrying value of the assets relating to this
operation, nor the going concern status of the Group as a whole. The mine
remains on care and maintenance at the date of this report, but subsequent to
the improved situation in Cote d'Ivoire management is reviewing the most
appropriate strategy for this asset.
Annual Report
The Annual Report will be sent to all shareholders on or around 3 June 2011 and
will be available on the Company's website at www.cluffgold.com. Additional
copies will be made available to the public, free of charge, from the Company's
registered office at 15 Carteret Street, London SW1H 9DJ.
Annual General Meeting
The Company's Annual General Meeting will be held at St. Stephen's Club, 34
Queen Anne's Gate, London SW1H 9AB on Monday 27 June 2011 at 10.00a.m.
(1) As per the Company's Increased Mineral Resource Estimate at its
Baomahun Gold Project, Sierra Leone press release announced on 4 June
2010
(2) A complete list of the infill drill results to date can be found in the
Company's Baomahun Gold Project Feasibility Study Update press release
announced on 3 May 2011
(3) As per the Company's Final VTEM Results for Baomahun Gold Project press
release announced on 1 December 2010
(4) As per the Company's Kalsaka Exploration Drilling Update press release
announced on 30 November 2010
(5) As per the Company's US$15M Private Placement with Macquarie Bank press
release announced on 28 October 2010
(6) As per Semafo Inc's Annual Information Form 2010 as filed on SEDAR
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