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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Acacia Mining Plc | LSE:ACA | London | Ordinary Share | GB00B61D2N63 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 234.00 | 234.60 | 235.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMACA
12 February 2017
Results for the 12 months ended 31 December 2017 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc ("Acacia") reports full year 2017 results
"We delivered resilient operational performance during a challenging 2017, with
full year gold production of 767,883 ounces at all-in sustaining costs ("AISC")
of US$875 per ounce", said Peter Geleta, Interim CEO of Acacia. "Whilst we were
impacted by events beyond our control, we took decisive action to stabilise our
business and believe our operations are now well placed to deliver in 2018. The
challenges in our operating environment led to our production guidance being
revised during 2017, whilst the ongoing ban on the export of gold/copper
concentrate meant that we were unable to export and sell 185,800 ounces of
produced gold which led to a substantial cash outflow. As expected, we will see
a step-down in production in 2018 to 435,000-475,000 ounces as Buzwagi
transitions to processing stockpiles and Bulyanhulu, whilst in reduced
operations, solely re-processes tailings. Our continued cost discipline means
that AISC will remain competitive at US$935-985 per ounce. Our focus remains on
delivering optimal performance from all aspects of the business within our
control in the current operating environment, returning the business to free
cash generation and delivering value for all of our stakeholders. We are
supporting efforts towards achieving a negotiated resolution with the Tanzanian
Government."
Operational Highlights
* Total Recordable Injury Frequency Rate (TRIFR) of 0.45, 39% lower than 2016
* 2017 gold production of 767,883 ounces, 7% lower than 2016 as a result of
lower production at Bulyanhulu primarily due to the transition to reduced
operations in Q4 2017
* Gold sales of 592,861 ounces, 22% lower than production, comprised 19,720
ounces of gold in concentrate, 10% of total concentrate production due to
the concentrate export ban imposed in March 2017 and 573,141 ounces of gold
in doré, in line with doré production
* 2017 AISC1 of US$875 per ounce sold, below full year guidance range and our
lowest ever achieved
* Successful drilling programme at North Mara has more than doubled the
Mineral Reserve at the Gokona Underground to 1.3Moz
* New management leading stabilisation of company and post year-end appointed
a senior Tanzanian to lead Tanzanian business
Financial Highlights
* Financial performance was significantly impacted by a post-tax non-cash
impairment charge of US$644 million resulting from uncertainty in the
operating environment and the ban on exporting concentrate, resulting in
US$264 million of lost revenue in the year
* Revenue of US$752 million, 29% lower than 2016, with Adjusted EBITDA1 of
US$311 million, 24% down from 2016
* Net loss of US$707 million includes a post-tax impairment charge of US$644
million, equating to a loss of US173 cents per share
* Adjusted net earnings of US$146 million and Adjusted EPS of US35.7 cents
were 9% below 2016
* Cash balance fell from US$318 million to US$81 million at year-end, due to
lost revenue resulting from the concentrate ban and a gross build-up of VAT
receivables of US$91 million, but was boosted post year-end by the sale of
a non-core royalty for US$45 million
* Entered into option agreements to provide a floor price of at least
US$1,300 per ounce for majority of H1 2018 production
* Contributed US$143 million of taxes and royalties to Tanzania and
implemented projects benefiting over 60,000 Tanzanians in 2017
Three months ended 31 Year ended 31
December December
(Unaudited) 2017 2016 2017 2016
Gold production (ounces) 148,477 212,954 767,883 829,705
Gold sold (ounces) 147,636 209,292 592,861 816,743
Cash cost (US$/ounce)1 581 679 587 640
AISC (US$/ounce)1 779 952 875 958
Net average realised gold price (US$/ 1,296 1,211 1,260 1,240
ounce)1
(in US$'000)
Revenue 189,249 263,890 751,515 1,053,532
EBITDA 1 45,463 105,681 257,180 415,388
Adjusted EBITDA1 67,613 103,010 310,527 409,903
Net (loss)/earnings (785,975) 48,285 (707,394) 94,944
Basic (loss)/earnings per share (EPS) (191.7) 11.8 (172.5) 23.2
(cents)
Adjusted net (loss)/earnings1 45,799 46,415 146,218 161,021
Adjusted net (loss)/earnings per share 11.2 11.3 35.7 39.2
(AEPS) (cents)1
Cash generated from operating (1,503) 60,933 (22,972) 317,976
activities
Capital expenditure2 21,301 57,826 149,376 195,898
Cash balance 80,513 317,791 80,513 317,791
Total borrowings 71,000 99,400 71,000 99,400
1 These are non-IFRS measures. Refer to page 33 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
The company recorded resilient performance in what became a difficult operating
environment in 2017 and expects to return the business to free cash generation
during the forthcoming year. Whilst operational performance was solid,
financial performance was significantly impacted by Tanzania's on-going ban on
exporting gold/copper concentrate which resulted in approximately US$264
million of lost revenue in 2017 and drove a total cash outflow of US$237
million.
Whilst we have been impacted by events beyond our control, our operations still
continued to deliver during 2017. It was especially pleasing to see a record
year of production at Buzwagi of 268,785 ounces in spite of the uncertainty
about the mine's future as the mine effectively completed the final stage of
the open pit ahead of moving to a stockpile processing operation for the next
three years. North Mara continued to perform well and delivered strong free
cash flow despite production of 323,607 ounces being below 2016's record year.
Grades from the Gokona Underground remained strong, albeit behind 2016's
bonanza grades, as the focus of mining was in the lower grade West Zone. During
the year we completed the mining of the Nyabirama Stage 3 open pit and
continued to progress waste stripping at the start of the Stage 4 open pit
which will provide the majority of the mill feed going forward. At Bulyanhulu
we made the difficult decision to move the mine to reduced operations in
September and temporarily cease production from the underground mine and
therefore gold/copper concentrates, after significant cash outflows through the
year. This was the primary driver behind production of 175,491 ounces being 39%
behind 2016's level.
On the cost side, we demonstrated further improvement in AISC as strict cost
discipline was maintained. Group AISC of US$875 per ounce sold was below the
guidance range and the lowest that Acacia has ever achieved. If Group sales
ounces had equalled production, AISC would have been approximately US$798 per
ounce sold. Buzwagi benefitted from increased production rates which drove an
AISC of US$667 per ounce sold, which was 39% lower than 2016, with inventory
adjustments largely offsetting the lack of sales of gold in concentrate. At
North Mara we saw a small increase in AISC to US$803 per ounce sold primarily
driven by the lower production base compared to the previous year. At
Bulyanhulu the impact of the lower sales and production base led to AISC per
ounce sold being 30% higher than 2016 at US$1,373 although this was partly
offset by lower capitalised development costs and lower sustaining capital
spend.
One of the key focus areas at Acacia over the last four years has been on
reducing the number of international employees and contractors within our
business and ensuring that our Tanzanian assets are increasingly led and
operated by Tanzanian employees. Since 2013, we have driven a reduction in
international employees of approximately 85% within our business and now over
96% of our people are Tanzanian. Since my appointment as Interim CEO, we have
continued this process and following the move to reduced operations at
Bulyanhulu and the transition of Buzwagi to stockpile processing we have
consolidated the management teams at the two mines, which are located within
the same region, into one, under the leadership of an experienced Tanzanian
national, Benedict Busunzu. We are pleased to report the combined Bulyanhulu
and Buzwagi management team is now made up of five Tanzanian nationals and one
international employee. Post year end we also appointed Asa Mwaipopo as our
Managing Director, Tanzania. Asa is a highly experienced Tanzanian mining
engineer, who has worked in the industry and for Acacia for a number of years
in increasingly senior roles. In his new role, he will head up our Tanzanian
business by becoming the Managing Director of each of our Tanzanian operating
entities with the mine general managers and functional heads in Tanzania
reporting directly into him.
Discussions between the Government of Tanzania ("GoT") and Barrick Gold
Corporation ("Barrick"), Acacia's majority shareholder, aimed at resolving the
current situation remain on-going. In October 2017, the GoT and Barrick each
announced that the parties had agreed to a framework on a way forward, and
Barrick has indicated that they expect to be able to present a detailed
proposal for a possible solution to Acacia for review and approval during the
first half of 2018. We are providing support to Barrick in its ongoing
discussions, and any proposal that may be agreed in principle between Barrick
and the GoT will require Acacia's approval.
Financial Overview
The positive operational performance was not translated in positive cash flow
due to Acacia's inability to export and sell a total of 185,800 ounces of gold,
12.1 million pounds of copper and 158,900 ounces of silver contained in
concentrate as a result of the concentrate export ban. This includes 10,678
ounces of gold in concentrate produced in late 2016 but not sold. This heavily
impacted our Bulyanhulu and Buzwagi mines which produced gold in both doré and
in concentrate form, while North Mara sales were unaffected by the ban due to
100% of its production being doré. This, together with an increase in indirect
tax receivables, meant that we ended the year with US$81 million of cash on our
balance sheet, a decrease from US$318 million on hand at the end of the
previous year. Net cash also fell, but we continued to repay our CIL debt
facility during 2017 and saw debt balances fall to US$71 million at the end of
2017. Post year end we completed the sale of a non-core royalty for US$45
million and this, together with the purchase of put options for a portion of
future gold sales and strong cost discipline will provide additional support to
our balance sheet.
Total revenue for the year amounted to US$752 million which was 29% lower than
2016 as a result of the inability to sell gold, copper and silver contained in
concentrate as set out above during the year. The lack of sales impacted
EBITDA, which at US$257 million was 38% below 2016. Net earnings were impacted
by the lack of sales, but also by a post-tax non cash impairment charge of
US$644 million, primarily associated with Bulyanhulu as a result of the
increased uncertainty in our operating environment and the movement to reduced
operations. This together with an increase in our uncertain tax provision from
US$128 million to US$300 million drove a net loss of US$707 million. Adjusted
net earnings amounted to US$146 million which was 9% below 2016.
Outlook
The group has successfully managed through a challenging environment to deliver
a year of resilient operational performance in 2017. As a result of
Bulyanhulu's transition to reduced operations and the planned transition of
Buzwagi to a stockpile processing operation in 2018 we expect to see a
step-down in production from 2017 levels to 435,000-475,000 ounces at increased
all-in sustaining cost of US$935-985 per ounce. Cash costs per ounce are also
expected to increase to between US$690-720 per ounce in 2018. Group AISC and
cash costs are both negatively impacted by approximately US$50 per ounce due to
the release of non-cash high cost inventory at Buzwagi as we process ore
stockpiles previously classified as ore inventory. We expect production to be
broadly flat through the year although due to the roll-over of cost from the
movement to reduced operations at Bulyanhulu into Q1 2018 we expect increased
cash flow in the second half of the year. All gold produced in 2018 is expected
to be in doré form.
At North Mara we expect production to be broadly in line with 2017 at
approximately 325,000 ounces as the continued increase in production from the
Gokona Underground is offset by lower open pit tonnes and grade as the
Nyabirama Stage 3 open pit is completed and all ore is sourced from the
beginning of the Stage 4 pit. AISC is expected to be approximately US$850 per
ounce, approximately 5% higher than 2017, driven by an increase in cash costs
due to the increased mining activity and increased allocation of corporate
shared services costs. During 2018 we will continue to progress the drilling
programmes at Gokona, which led to a doubling of underground reserves in 2017
to 1.3Moz at a grade of 6.3 g/t. At Nyabirama we are also progressing the
permitting for an underground exploration decline, this process is expected to
be completed in 2018.
At Bulyanhulu we completed the transition to reduced operations in the fourth
quarter, which regrettably led to the retrenchment of the majority of the
workforce at the mine. In total, the retrenchments, together with the
cancellation of supply contracts, led to a cost of US$25 million, with US$20
million incurred in Q4 2017 and the balance due to be incurred in Q1 2018. In
addition we saw an outflow of accounts payable of approximately US$35 million,
of which US$5 million is expected to be incurred in Q1 2018. Whilst the mine is
on reduced operations, at a monthly cost of approximately US$3 million, Acacia
is taking the opportunity to progress essential capital spend of approximately
US$10 million, primarily on the process plant, together with an optimisation
study which is designed to ensure that when the mine restarts it does so in an
optimised manner. These costs are excluded from AISC on the principle that they
are not representative of operational costs. The study is expected to take
until H2 2018 to be completed and as a result Acacia does not expect the
underground mine to restart in 2018 and is targeting a phased restart through
2019, assuming the concentrate ban is resolved during 2018. The mine will
continue with the re-processing of tailings through 2018 at an annual
production rate of approximately 30,000 ounces and an AISC of approximately
US$1,000 per ounce, which will partially offset the cost of reduced operations.
As previously guided, Buzwagi is transitioning to a stockpile processing
operation in 2018 as a result of the effective completion of the open pit and
will see a step down in production as a result. During 2017 the mine exceeded
its production plan by 15,000 ounces whilst delivering over 5 million tonnes of
ore to the stockpile, albeit at lower grades. As a result expected life of mine
production has increased by approximately 100,000 ounces. In 2018, mill feed
will be almost exclusively from the stockpiles and as a result head grades are
expected to drop significantly resulting in production for the year being
approximately 100,000 ounces. As a result of the lower production and release
of non-cash high cost inventory of approximately US$200 per ounce, reported
AISC is due to increase to approximately US$1,100 per ounce sold, although we
are looking to optimise the cost profile as we transition to stockpile
processing.
As a result of reduced operations at Bulyanhulu we expect to see Group capital
expenditure in 2018 fall to approximately US$100 million. This is comprised of
approximately US$50 million of capitalised development / stripping at North
Mara, US$35 million of sustaining capital, primarily at North Mara, and US$15
million of expansion capital, made up predominantly of investment in the
process plant at Bulyanhulu and 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.
Acacia is committed to strong cost discipline and is continuing to take steps
to ensure the long-term viability of our business whilst we await an outcome of
the discussions between Barrick and the Government of Tanzania. During 2017
Acacia made significant decisions at both the Bulyanhulu and Buzwagi operations
and we should now be able to sell all of the gold we produce going forward. We
continue to take steps to protect the balance sheet including a reduction in
planned greenfield exploration spend in 2018 to US$15 million, and whilst we
currently anticipate corporate overheads being in line with 2017, we are
targeting reducing this spend during the year.
Contribution to Tanzania
Acacia continues to share the Government of Tanzania's goals of enhancing the
country's social and economic development and in 2017 contributed US$143
million in taxes and royalties to Tanzania. Since the inception of its
businesses, over 15 years ago, the Company, and its predecessors, have invested
over US$4 billion into the country to build and sustain our mines, spent over
US$3 billion with Tanzanian suppliers to support the operation of our
businesses, invested over US$75 million into our communities and paid over US$1
billion in taxes and royalties. We have also built a 60 kilometre water
pipeline to supply clean water to communities around Bulyanhulu, invested US$45
million to provide electricity to communities, built and renovated 57 schools
in the Lake Zone whilst providing over 18,000 desks and building 129 teachers
houses.
In terms of developing sustainable communities around our mines over the last
five years, Acacia has invested heavily in building social infrastructure such
as schools, roads, health and water facilities in close cooperation with its
surrounding population. In 2017 we began the implementation of the new
Sustainable Communities ("SC") Strategy which focuses on adding further value
to this physical infrastructure and contributing positively to the development
of a diversified local economy in our zone of influence. We believe that the SC
Strategy is aligned with Tanzania's national development agenda, as well as the
United Nations' Sustainable Development Goals.
By the end of 2017 we had achieved an approximate 80% delivery rate on our
infrastructure legacy commitments. This included the completion and/or
initiation of a number of projects at all three mines. Projects included a
US$500,000 upgrade of the Bugarama Health Centre at Bulyanhulu which supports
healthcare for 58,000 people living in the 14 villages in Kakola and its
surrounding areas. The focus at Buzwagi has been the construction of a new
dormitory at Mwendakulima Secondary School for female pupils after the original
dormitory was accidentally destroyed in a fire. The new dormitory will
accommodate more than 100 pupils and make secondary education more accessible
to girls. At North Mara we constructed the Nyamwaga and Kerende Health Centres
and invested in the Nyamwaga/Keisangora water projects designed to improve
access to clean water.
Operating Environment
On 3 March 2017, the Ministry of Energy and Minerals of the Tanzanian
Government announced a general ban on the export of metallic mineral
concentrates following a directive made by the President of the United Republic
of Tanzania. Following the directive, we immediately ceased all exports of our
gold/copper concentrate including the 277 containers that had been approved for
export prior to the ban and which remain impounded in Dar es Salaam at either
the port or a staging warehouse. As mentioned above, the export ban impacts
Bulyanhulu and Buzwagi which ordinarily produced a proportion of their gold in
concentrate form due to the mineralogy of the ore at those two mines. North
Mara production and sales were unaffected by the ban on export of concentrates
due to 100% of its production being doré.
During the second quarter of 2017 two Presidential Committees announced their
findings following investigations into the technical and economic aspects of
the historic exports of gold/copper concentrates. Acacia has fully refuted the
implausible findings of both committees, which claimed that Acacia and its
predecessor companies had historically and significantly under-declared the
contents of exports of concentrate. Acacia reiterates that it has declared
everything of commercial value that it has produced since it started operating
in Tanzania and has paid all appropriate royalties and taxes on all of the
payable minerals that it has produced. Acacia has requested copies of the
reports of the two Presidential Committees and called for independent
verification of the results announced by the Committees, but to date has not
received a response to these requests.
In late June 2017, new legislation was proposed which made significant changes
to the legal and regulatory framework governing the natural resources sector as
a whole in Tanzania. Post year-end new mining regulations were also issued
which are currently being reviewed. Prior to the legislation being passed into
law in early July 2017, in order to protect the Company, Bulyanhulu Gold Mine
Limited ("BGML"), the owner of the Bulyanhulu mine, and Pangea Minerals Limited
("PML"), the owner of the Buzwagi mine, each commenced international
arbitrations against the GoT in accordance with the dispute resolution
processes agreed by the GoT in the Mineral Development Agreements ("MDAs") with
BGML and PML. These arbitrations remain ongoing. Acacia continues to monitor
the impact of the new legislation in light of its MDAs with the GoT. However,
to minimise further disruptions to our operations we have been, in the interim,
satisfying the requirements imposed by the new legislation as regards the
increased royalty rate applicable to metallic minerals such as gold, copper and
silver of 6% (increased from 4%), in addition to a new 1% clearing fee on
mineral exports. These payments are being made under protest, without prejudice
to our legal rights under our MDAs.
In July, BGML and PML received adjusted tax assessments from the Tanzanian
Revenue Authority ("TRA") totalling US$190 billion for alleged unpaid taxes,
interest and penalties, apparently issued in respect of alleged and disputed
under-declared export revenues, and appearing to follow on from the announced
findings of the First and Second Presidential Committees. Acacia refutes the
findings of each Committee, re-iterates that it has fully declared all
revenues, and has requested copies of the reports of the Committees and
independent expert verification of their findings. Acacia has requested the TRA
to provide calculations and the necessary substantiation to support these
assessments as well as a subsequent conflicting set of adjusted assessments for
PML which amount to US$3 billion and appear to relate to the historical
operation of the Tulawaka mine at which PML ceased operations in 2013. The TRA
has so far not provided its calculations or substantiation for the adjusted
assessments, and Acacia is objecting to and defending these through the
Tanzanian tax appeals processes. The allegations made by the First and Second
Committees are included in the matters that have already been referred to
international arbitration by BGML and PML. In addition, the Company continues
to dispute and defend in accordance with Tanzanian law and procedure the
outstanding tax claims previously reported as having been brought by the TRA
against Acacia Mining plc, on the purported basis that Acacia itself has
established tax residence in Tanzania. These appeals remain the subject of the
Tanzanian tax appeals processes.
In July 2017, Barrick, Acacia's majority shareholder, announced that it had
commenced discussions with the GoT aimed at identifying a possible solution to
Acacia's disputes with the GoT. The GoT informed Barrick that it wished to
continue their dialogue, and therefore Acacia has not participated directly in
these discussions.
In October 2017, Barrick and the GoT announced that they had agreed a framework
proposing a new partnership between Acacia and the GoT. As announced by
Barrick, the key terms of the proposal included that: the economic benefits
generated by the Company's operations in Tanzania would be shared between
Acacia and the GoT on a 50/50 basis going forward, to be delivered in the form
of royalties, taxes and a 16% free carry interest in the operating mines; the
establishment of a new Tanzanian operating company to manage the mining
operations, with GoT participation in decision-making on certain issues; a
number of social licence to operate projects and commitments; there would be
further work with the GoT to advance concepts for increasing in-country
beneficiation of gold; and Acacia would make a US$300 million payment, staged
over time, in respect of outstanding tax claims between Acacia and the GoT.
Since October, Barrick and the GoT have continued discussions aimed at agreeing
and documenting the details of the announced framework, and Barrick have
announced that they are targeting completion in H1 2018. Acacia continues to
support Barrick in its discussions with the Tanzanian Government towards
identifying a possible negotiated resolution. Acacia is not directly involved
in the ongoing discussions, and awaits a detailed agreed proposal and
documented final agreements for a comprehensive settlement, which will be
reviewed by an Independent Committee of the Company's Directors.
Safety
Safety performance during 2017 demonstrated significant progress on the
previous year. The Company recorded a Group-wide Total Recordable Injury
Frequency Rate ('TRIFR') of 0.45 compared to 0.74 in 2016, a 39% improvement.
The number of Lost Time Injuries ('LTI') decreased from 32 in 2016 to 18 in
2017, a 44% improvement, and the injury severity rate decreased by 35%. We also
progressed a number of initiatives within an occupational health and safety
context to increase the effectiveness of existing occupational health
programmes and continued to progress health assessments, including malaria
control assessments, for our employees and wider community base. The total
number of malaria cases and the days lost due to malaria decreased by 29% and
51% respectively during 2017.
Carrying Value Review and Tax Provision
Acacia has identified a number of potential triggers for impairment testing of
the carrying value of its assets, including but not limited to, the challenges
experienced in the operating environment in Tanzania, the announcement of new
legislation by the GoT in respect of the natural resources sector and the
resulting decision to reduce operations at Bulyanhulu. As a result, Acacia has
undertaken a carrying value review of the Group's affected Cash Generating
Units (CGUs).
Acacia considers that in accordance with applicable accounting standards,
carrying values for the CGUs should be calculated by reference to the key terms
of the Framework announcements made by Barrick and by the GoT in October 2017
and discussed above, with additional discounting to reflect the uncertainty
around the final terms of any comprehensive settlement that might be reached.
While Acacia continues to provide support to Barrick in its discussions with
the GoT, Acacia has not yet received for review and approval a detailed
proposal that has been agreed between Barrick and the GoT, and no conclusions
can be made by Acacia as to whether any particular terms of settlement would be
approved by Acacia. In the meantime, Acacia continues to reserve its rights
included under our mine development agreements, the disputes between Acacia and
the GoT have not yet been resolved, and PML and BGML remain in international
arbitration with the GoT. Acacia would prefer a negotiated resolution, but
believes that there remain a range of potential outcomes to the current
situation.
This carrying value review demonstrates a potential reduction in value at all
three operating assets, but Buzwagi and North Mara have sufficient headroom
above their current carrying values. At Bulyanhulu, however, the impact of the
changes was greater, due to the long life of the mine and the delay to a return
to positive cash generation due to the move to reduced operations. Acacia has
therefore recorded a net impairment of US$632 million for Bulyanhulu, which
includes a pre-tax write-down of US$122 million for goodwill. In addition we
have recorded an impairment charge of US$12 million for the Nyanzaga Project to
reflect the current estimate for the potential impact of the new mining laws on
the carrying value of the project, which now stands at US$34 million.
In addition to the above net impairment, Acacia has also raised an additional
tax provision of US$172 million relating to the estimated uncertain tax
positions for its operating companies, based on an estimate of the impact of a
comprehensive settlement reflecting the key terms of the Framework
announcements. This brings total provisions for Acacia's uncertain tax
positions to US$300 million. Acacia continues to reserve and protect all its
legal rights, as noted above and including through the arbitrations commenced
by BGML and PML, and no liability has been incurred by Acacia as a result of
the Framework announcements. The additional provision is required, however, to
meet applicable accounting standards requiring assessment of current
obligations for accounting purposes based on an assessment of relevant cash
outflows from the relevant operating companies in respect of uncertain tax
positions.
Reserves and Resources
Notwithstanding the performance of the gold price in 2017 we have taken the
decision to maintain the 2016 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 decreased slightly from
27.6 million ounces ("Moz") to 27.4Moz during the year with total Reserves
marginally decreasing from 7.6Moz to 7.5Moz driven by depletion.
At North Mara, Reserves increased by 438,000 ounces (23%) from 1.9Moz in 2016
to 2.3Moz. This was driven by successful drilling programmes at the Gokona
Underground where Reserves increased from 656,000 ounces at 6.0 g/t to
1,338,000 ounces at 6.3 g/t, despite depletion of 188koz during the year. This
is the first step in demonstrating the long term potential of the Gokona
Underground.
At Bulyanhulu, overall Reserves decreased by 417koz with the underground
Reserve now amounting to 4.5Moz at 9.70 g/t compared to 4.9Moz at 9.76 g/t. The
change included depletion of 223koz and a further reduction of 199koz due to
changes to the short and medium term designs. A study completed on remnant
mining around the Upper Reef 1 and Reef 2 areas indicated positive economics
and added 151koz to Reserves. The Tailings Reserve decreased to 180koz ounces
at 1.05 g/t due to depletion. During 2018 we expect to review the mine reserves
in the context of the optimisation study currently underway.
At Buzwagi, Reserves declined due to depletion as the final stage of the open
pit was effectively completed. However, during 2017, the run-of-mine stockpile,
which will be processed over the next three years, increased by 5 million
tonnes with a 48% increase in contained gold to 414koz ounces, albeit at lower
grades of 0.91g/t.
At our exploration properties overall resources remained flat with the addition
of resources in Kenya being offset by the removal of the Golden Ridge project
from resource and a reduction in resource at Nyanzaga. After completing a
significant exploration drilling programme during the year at the Liranda
Project in Kenya we updated the Maiden Inferred Mineral Resource declared in
February 2017. The updated model showing that the Isulu Inferred Resource has
changed with additional drilling confirming structural complexity. The enhanced
modelling of the Isulu resource has upgraded confidence and increased grade.
Additionally the upper parts of two zones in the Bushiangala Prospect were
upgraded from mineral inventory to an Inferred Resource Estimate. The updated
Inferred Resource Estimate returned 2.5 million tonnes at 12.9 g/t Au for 1.044
million ounces at Isulu and for Bushiangala 374,600 tonnes at 10.5 g/t Au for
126,600 ounces for a project total of 2.9 million tonnes at 12.6 g/t for
1.2Moz.
Board and Management Changes
At the end of 2017, there were a number of senior management departures, with
Brad Gordon, CEO, Andrew Wray, CFO, Mark Morcombe, COO and Peter Spora, Head of
Discovery stepping down. Brad Gordon and Andrew Wray were instrumental in the
turnaround of the business over the past four years, with Mark Morcombe
embedding operational discipline and Peter Spora spearheading our growth across
Africa. Acacia wishes them all well for the future. Whilst it was disappointing
to see these experienced and valued colleagues depart, we have significant
depth within the business. My 35 years of industry experience primarily in
African gold mining and alongside our new CFO, Jaco Maritz's 15 years of
experience in the Acacia business, ensures we have the right team to lead the
stabilisation of the company over the next twelve months and then onto the next
stage in its development.
With respect to the Board, during the year Peter Tomsett and Ambassador (retd)
Juma Mwapachu stepped down from the Board, and at the beginning of 2018 I
replaced Brad Gordon on the Board of Directors. In addition, Michael Kenyon has
been appointed as the Senior Independent Director of the Company, in light of
his role as Chair of the Company's Independent Committee. Following these
changes, the Acacia Board comprise of seven members, including four Independent
Non-Executive Directors, two Non-Executive Directors and one Executive
Director. Acacia would like to thank Brad, Peter and the Ambassador for their
valuable commitment and support to the Company during their tenure on the Board
and wish them all the best for the future.
Dividend
Acacia has a cash flow based dividend policy where we aim to pay a dividend of
between 15-30% of our operational cash flow after sustaining capital and
capitalised development but before expansion capital and financing costs. As a
result of the inability to export concentrates Acacia has experienced negative
free cash flow in 2017 and therefore the Board of Directors has not recommended
the payment of a final dividend.
Finally, I would like to thank all of my colleagues for their commitment,
resilience and continued focus during what has been a challenging year for
Acacia. I would also like to thank our Board for their support. We continue to
prefer a negotiated solution to our disputes with the Government of Tanzania,
continue to support Barrick in its discussions with the Government, and remain
hopeful for a resolution during 2018.
Peter Geleta
Interim Chief Executive Officer
Key Statistics Three months ended Year ended 31
31 December December
(Unaudited) 2017 2016 2017 2016
Tonnes mined (thousands of tonnes) 5,270 9,644 31,917 38,491
Ore tonnes mined (thousands of tonnes) 2,274 2,584 13,707 9,419
Ore tonnes processed (thousands of tonnes) 1,855 2,567 8,719 9,818
Process recovery rate exc. tailings reclaim 91.1% 92.5% 92.4% 92.3%
(percent)
Head grade exc. tailings reclaim (grams per 2.8 3.2 3.3 3.3
tonne)
Process recovery rate inc. tailings reclaim 90.2% 88.9% 90.0% 88.5%
(percent)
Head grade inc. tailings reclaim (grams per 2.8 2.9 3.0 3.0
tonne)
Gold production (ounces) 148,477 212,954 767,883 829,705
Gold sold (ounces) 147,636 209,292 592,861 816,743
Copper production (thousands of pounds) - 4,255 12,897 16,239
Copper sold (thousands of pounds) - 3,384 1,341 14,745
Cash cost per tonne milled exc. tailings reclaim 48 66 43 62
(US$/t)1
Cash cost per tonne milled inc. tailings reclaim 46 55 40 53
(US$/t)1
Per ounce data
Average spot gold price2 1,275 1,222 1,257 1,251
Net average realised gold price1 1,296 1,211 1,260 1,240
Total cash cost1 581 679 587 640
All-in sustaining cost1 779 952 875 958
Average realised copper price (US$/lb) - 2.45 2.98 2.21
Financial results
Three months ended 31 Year ended 31
December December
(Unaudited, in US$'000 unless 2017 2016 2017 2016
otherwise stated)
Revenue 189,249 263,890 751,515 1,053,532
Cost of sales (108,942) (196,314) (458,447) (727,080)
Gross profit 80,307 67,576 293,068 326,452
Corporate administration (7,613) (6,218) (26,913) (21,895)
Share based payments (186) 9,795 8,236 (29,929)
Exploration and evaluation costs (3,384) (7,330) (24,829) (24,020)
Corporate social responsibility (2,354) (3,068) (8,213) (10,665)
expenses
Impairment charge (850,182) - (850,182) -
Other (charges)/income (46,567) 1,208 (90,370) 11,649
Loss/(profit) before net finance (829,979) 61,963 (699,203) 251,592
expense and taxation
Finance income 140 365 1,944 1,512
Finance expense (3,971) (2,644) (12,407) (11,047)
Loss/(profit) before taxation (833,810) 59,684 (709,666) 242,057
Tax credit/(expense) 47,835 (11,399) 2,272 (147,113)
Net (loss)/profit for the period (785,975) 48,285 (707,394) 94,944
1 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures" on page 33 for definitions.
2 Reflect the London PM fix price.
For further information, please visit our website: http://www.acaciamining.com/
or contact:
Acacia Mining plc +44 (0) 207 129 7150
Peter Geleta, Interim Chief Executive Officer
Jaco Maritz, Chief Financial Officer
Giles Blackham, Head of Investor Relations & Corporate Development
Camarco +44 (0) 20 3757 4980
Gordon Poole / Nick Hennis
About Acacia Mining plc
Acacia Mining plc (LSE:ACA) is Tanzania's largest gold miner and one of the
largest producers of gold in Africa. We have three mines, all located in
north-west Tanzania: Bulyanhulu, Buzwagi, and North Mara and a portfolio of
exploration projects in 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 12 February 2018 at
Noon London time.
For those unable to attend, an audio webcast of the presentation will be
available on our website http://www.acaciamining.com/. For those who wish to
ask questions, the access details for the conference call are as follows:
Participant dial in +44 20 3936 2999
Password: 506844
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
Operating Review 10
Exploration Review 17
Financial Review 25
Significant judgements in applying accounting policies and key sources of 32
estimation uncertainty
Non-IFRS measures 33
Risk Review 37
Condensed Financial Information:
- Consolidated Income Statement and Consolidated Statement of Comprehensive 38/39
Income
- Consolidated Balance Sheet 40
- Consolidated Statement of Changes in Equity 41
- Consolidated Statement of Cash Flows 42
- Notes to the Condensed Financial Information 43
Reserves and Resources 64
Operating Review
Despite the significant uncertainty caused by the operating environment in
Tanzania, Acacia has continued to deliver improved safety performance, with a
full year Total Recordable Injury Frequency Rate (TRIFR) of 0.45 compared to
0.74 in 2016, a 39% improvement. This performance is coupled with a significant
decrease in the number of Lost Time Injuries ('LTI') which decreased from 32 in
2016 to 18 in 2017, a 44% improvement, and the injury severity rate, which
decreased by 35%.
During 2017, Acacia delivered production of 767,883 ounces, a decrease of 7%
year on year, while AISC of US$875 per ounce sold and cash cost of US$587 per
ounce sold were 9% and 8% lower than 2016 respectively. As a result of the ban
on the export of gold/copper concentrate, sales ounces trailed production by
approximately 175,022 ounces. If sales ounces equalled production, AISC would
have been approximately US$798 per ounce and cash costs would have been
approximately US$576 per ounce.
North Mara achieved full year production of 323,607 ounces, 14% lower than in
2016. This was a result of a 13% lower head grade driven by lower grades
received from the Gokona underground primarily due to the focus on the lower
grade West Zone. The lower head grade was also impacted by lower grades
received from the Nyabirama pit due to increased mining from the beginning of
the Stage 4 open pit. Gold ounces sold for the year of 324,455 ounces were in
line with production, but 14% lower than 2016 due to the lower production base.
AISC of US$803 per ounce sold was 10% higher than 2016 primarily due to higher
cash costs and the lower production base, partly offset by lower capitalised
development and lower sustaining capital costs.
At Buzwagi, record gold production of 268,785 ounces was 66% higher than in
2016, and higher than expectations. This was mainly due to a 75% higher head
grade as a result of higher grade ore mined from the main ore zone at the
bottom of pit. Gold sold for the year amounted to 160,552 ounces, in line with
2016 and 40% lower than production, a direct result of the inability to export
concentrate. AISC per ounce sold of US$667 was 39% lower than 2016, mainly
driven by lower cash costs.
At Bulyanhulu, gold production of 175,491 ounces was 39% lower than the prior
year. This was due to a 34% decrease in run-of-mine tonnes for the year
primarily due to the decision to transition Bulyanhulu into reduced operations
at the end of Q3 2017. In addition a drought experienced in the Kahama district
led to nearly a 4 month halt in production from reprocessed tailings which
meant that production was 36% lower than the previous year. Gold sales for the
year were 107,855 ounces, 39% behind production due to the impact of the
concentrate export ban. The impact of the lower sales and production base led
to AISC per ounce sold being 30% higher than 2016 at US$1,373 although this was
partly offset by lower capitalised development costs and lower sustaining
capital spend.
Total tonnes mined during the year amounted to 31.9 million tonnes, 17% lower
than 2016, mainly as a result of a 63% decrease in total waste tonnes mined at
Buzwagi as the open pit effectively concluded at the end of the year. Ore
tonnes mined of 13.7 million tonnes were 46% higher than 2016 predominantly
driven by increased ore tonnes from Buzwagi as a result of improved access to
ore zones in the final stage of the open pit in 2017.
Ore tonnes processed amounted to 8.7 million tonnes, 11% lower than in 2016.
This was mainly due to lower reprocessed tailings throughput at Bulyanhulu
following the halt of production from September to November due to water
shortages as well as the impact of the lower run of mine tonnes.
Head grade for the period (excluding tailings retreatment) of 3.3g/t was in
line with 2016, the lower head grade at North Mara was offset by the higher
head grade at Buzwagi as a result of higher grade ore mined at the main ore
zone.
Cash costs of US$587 per ounce sold for the year were 8% lower than in 2016
(US$640 per ounce sold), primarily due to:
* Increased investment in ore stockpiles, mainly at Buzwagi due to the higher
production base (US$50/oz);
* Lower G&A costs mainly at Bulyanhulu driven by lower stock write downs,
lower logistic and warehousing costs and lower camp costs as well as lower
aviation costs at all sites (US$40/oz);
* Lower consumable costs mainly driven by lower usage at Bulyanhulu and
improved consumable unit costing and usage optimisation at Buzwagi (US$32/
oz);
These were offset by:
* Lower sales volumes partly offset by a build-up in finished goods ounces
mainly at Bulyanhulu and Buzwagi (US$85/oz);
* Lower co-product revenue in the form of copper concentrates due to a lack
of concentrate exports (US$54/oz) and
* Lower capitalised mining cost, mainly driven by the halting of development
activities at Bulyanhulu, and at North Mara, due to a decrease in
capitalised stripping costs relating to the Nyabirama Cut 4 cutback and
lower underground waste development costs (US$51/oz).
Included in cost of sales and ultimately cash cost for 2017 is a credit of
approximately US$94.2 million (US$157/oz) relating to the build-up in finished
gold inventory due to concentrate sales delays, which largely offsets the
impact of the reduction in sales ounces in the cash cost per ounce sold
calculation.
All-in sustaining cost of US$875 per ounce sold was 9% lower than in 2016,
despite the lag in sales against production. This was driven by the lower
capitalised development costs at both North Mara and Bulyanhulu (US$64/oz), a
credit relating to share based payment revaluation driven by the approximate
47% reduction in the Acacia share price during the year (US$64/oz), lower cash
costs (US$53/oz) as explained above and lower sustaining capital spend at
Bulyanhulu and North Mara (US$28/oz), partly offset by the impact of lower
sales volumes on individual cost items (US$120/oz).
If our sales ounces equalled production, AISC would have been approximately
US$798 per ounce sold, compared to US$945 per ounce sold on the same basis in
2016, a decrease of 16%, and excluding the impact of non-cash share based
payment revaluation credits would have been approximately US$809.
Cash generated from operating activities was an outflow of US$23.0 million
which was a decrease of US$340.9 million from 2016 (US$318.0 million). The
inability to export our concentrate since Q1 2017 has had a negative impact on
operating cash flow of approximately US$245.0 million. Working capital outflows
mainly relating to an increase in indirect tax receivables and to increases in
supplies inventory, settlement of trade and other payables, and other current
assets which included the North Mara corporate tax deposit further impacted
cash generated from operating activities.
Capital expenditure amounted to US$149.4 million, 24% lower compared to the
capital expenditure of US$195.9 million in 2016. Capital expenditure primarily
comprised of capitalised development and stripping (US$100.6 million),
investment in fixed equipment and mining infrastructure at Bulyanhulu (US$9.0
million) and at North Mara (US$13.7 million), investment in mobile equipment
and component change-outs at both North Mara and Bulyanhulu (US$8.1 million)
and land purchases at North Mara (US$1.6 million).
Mine Site Review
Bulyanhulu
Key statistics
Three months ended 31 Year ended 31
December December
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced oz 2,855 79,859 175,491 289,432
Ounces sold oz 376 74,803 107,855 279,286
Cash cost per ounce sold12 US$/oz - 784 840 722
AISC per ounce sold12 US$/oz - 1,061 1,373 1,058
Copper production Klbs - 1,707 3,906 6,391
Copper sold Klbs - 1,309 588 5,570
Run-of-mine:
Underground ore tonnes Kt - 244 596 909
hoisted
Ore milled Kt - 263 612 933
Head grade g/t - 9.1 8.6 9.3
Mill recovery % - 91.8% 90.1% 91.4%
Ounces produced oz - 70,808 153,279 254,552
Cash cost per tonne milled1 US$/t - 209 126 197
Reprocessed tailings:
Ore milled Kt 105 451 1,010 1,650
Head grade g/t 1.4 1.3 1.4 1.4
Mill recovery % 58.7% 47.2% 48.0% 45.8%
Ounces produced oz 2,856 9,051 22,212 34,880
Capital Expenditure
- Sustaining capital US$ (2,447) 3,833 9,033 20,231
('000)
- Capitalised development US$ 337 15,996 39,543 63,082
('000)
- Expansionary capital US$ 151 188 1,190 1,262
('000)
(1,959) 20,017 49,766 84,575
- Non-cash reclamation US$ (4,735) 3,853 (4,158) 10,728
asset adjustments ('000)
Total capital expenditure US$ (6,694) 23,870 45,608 95,303
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 33 for definitions.
2Cash cost per ounce sold and AISC per ounce sold for the quarter are
non-meaningful due to the impact of negligible sales ounces on the costs
relating to reprocessed tailings.
Operating performance
Gold production of 175,491 ounces was 39% lower than 2016, mainly driven by a
34% decrease in run-of-mine tonnes for the year primarily due to the transition
of Bulyanhulu into reduced operations at the end of Q3 2017. In addition a
drought experienced in the Kahama district led to nearly a 4 month halt in
production from reprocessed tailings which meant that production was 39% lower
than the previous year. Gold production comprised of 95,116 ounces in doré and
80,375 ounces in gold/copper concentrate.
Gold sold for the year of 107,855 ounces, was 39% lower than production and 61%
lower than 2016 mainly as a result of the inability to export concentrate from
early March combined with the lower production base.
Copper production of 3.9 million pounds for the year was 39% lower than 2016
mainly due to Bulyanhulu being on reduced operations since the end of Q3
resulting in no concentrate production for the rest of 2017, combined with
lower copper grades for the year. Copper sales were 89% lower than 2016
primarily due to the lack of exports of concentrate.
Cash costs of US$840 per ounce sold were 16% higher than 2016 (US$722), mainly
due to the lower production base (US$712/oz), lower co-product revenue (US$116/
oz) and lower capitalised development costs (US$178/oz). This was partly offset
by lower G&A costs mainly due to lower warehousing costs; lower stock write
downs and lower camp costs (US$207/oz), lower sales related costs due to lower
sales volumes (US$153/oz), lower maintenance cost (US$153/oz), lower
consumables cost (US$152/oz), lower energy and fuel costs (US$92/oz), lower
labour costs due to restructuring (US$66/oz) and lower contracted services
costs (US$46/oz).
AISC per ounce sold of US$1,373 was 30% higher than 2016 (US$1,058/oz) driven
by the impact of lower sales ounces on individual cost items (US$533/oz) and
higher cash cost as explained above (US$117/oz), partly offset by lower
capitalised development costs (US$218/oz) and lower sustaining capital spend
(US$104/oz). Should we have been able to sell all ounces produced, AISC would
have been approximately US$1,122 per ounce.
Capital expenditure for the year before reclamation adjustments amounted to
US$49.8 million, 41% lower than 2016 (US$84.6 million). This was mainly driven
by lower sustaining capital expenditure due to the transition of Bulyanhulu to
reduced operations and cash saving initiatives implemented which resulted in
projects being deferred or cancelled as well as lower capitalised development
driven by the halt of underground mining activities. Capital expenditure mainly
consisted of capitalised underground development costs (US$39.5 million),
underground ventilation raise borings (US$1.8 million), paste reticulation
(US$1.5 million), ventilation fan upgrades (US$1.3 million) and a power
stability project (US$1.2 million).
The transition to reduced operations at Bulyanhulu which was completed in the
fourth quarter, regrettably led to the retrenchment of the majority of the
workforce at the mine. In total, the retrenchments, together with the
cancellation of supply contracts led to a cost of US$25 million, with US$20
million incurred in Q4 2017 and the balance due to be incurred in Q1 2018. In
addition we saw an outflow of accounts payable of approximately US$35 million,
of which US$5 million is expected to be incurred in Q1 2018. Whilst the mine is
on reduced operations, at a monthly cost of approximately US$3 million, Acacia
is taking the opportunity to progress essential capital spend of approximately
US$10 million, primarily on the process plant, together with an optimisation
study which is designed to ensure that when the mine restarts is does so in an
optimised manner. The study is expected to take until H2 2018 to be completed
and as a result Acacia does not expect the underground mine to restart in 2018
and is targeting a phased restart through 2019 assuming the concentrate ban is
resolved during 2018. The mine will continue with the re-processing of tailings
through 2018 at an annual production rate of approximately 30,000 ounces and an
AISC of approximately US$1,000 per ounce, which will partially offset the cost
of reduced operations.
Buzwagi
Key statistics
Three months ended 31 Year ended 31
December December
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced oz 73,604 41,912 268,785 161,830
Ounces sold oz 75,520 41,514 160,552 161,202
Cash cost per ounce sold1 US$/oz 535 1,035 594 1,031
AISC per ounce sold1 US$/oz 583 1,056 667 1,095
Copper production Klbs - 2,547 8,991 9,847
Copper sold Klbs - 2,075 752 9,175
Mining information:
Tonnes mined Kt 1,545 5,090 15,368 21,585
Ore tonnes mined Kt 1,321 1,509 9,309 5,317
Processing information:
Ore milled Kt 1,041 1,159 4,256 4,404
Head grade g/t 2.4 1.2 2.1 1.2
Mill recovery % 90.8% 94.5% 94.3% 94.5%
Cash cost per tonne milled1 US$/t 39 37 22 38
Capital Expenditure
- Sustaining capital US$ 1,235 264 4,338 3,582
('000)
1,235 264 4,338 3,582
- Non-cash reclamation asset US$ (2,192) 3,312 (1,978) 4,524
adjustments ('000)
Total capital expenditure US$ (957) 3,576 2,360 8,106
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non-IFRS measures" on page 33 for definitions.
Operating performance
Buzwagi delivered record gold production of 268,785 ounces for 2017 which was
66% higher than in 2016 mainly due to a 75% higher head grade as a result of
higher grade ore mined from the main ore zone at the bottom of pit. Production
for the year comprised of 113,035 ounces of gold in concentrate and 155,749
ounces of gold in doré.
Gold sold for the year amounted to 160,552 ounces, in line with 2016 and 40%
lower than production, a direct result of the inability to export concentrate
from early March 2017. As a result of this, in September 2017 Buzwagi ceased
operating the flotation circuit which had previously been planned to run into
the first part of 2018 but continued to run the existing gravity and CIL
circuits which resulted in gold production for the last 4 months of the year
being solely in doré form. Prior to the change, gold/copper concentrate made up
approximately 60% of production.
Buzwagi engaged extensively with relevant government agencies regarding the
processing trials, both prior to and after the implementation of the decision
to bring forward ceasing operation of the flotation circuit. While ceasing to
operate the flotation circuit did not require prior regulatory approvals and
did not involve additional or new process plant or processing technology,
Buzwagi has recently received further correspondence from the Ministry of
Minerals requiring the restoration of operation of the flotation circuit and
seeking further explanations from Buzwagi on the Government's position
regarding potentially applicable regulatory approvals. The Company will
continue to engage closely with Government agencies on this and other operating
and regulatory issues.
Total tonnes mined of 15.4 million tonnes were 29% lower than 2016, primarily
due to the focus of mining at the bottom of the pit which contains more ore
tonnes compared to waste tonnes resulting in 75% higher ore tonnes mined during
2017 compared to 2016.
Copper production of 9.0 million pounds for the year was 9% lower than the
comparative period mainly due to the bypass of the flotation circuit during
September 2017 resulting in no copper production for the rest of 2017, partly
offset by increased copper grades. Copper sold was 92% lower than 2016,
primarily due to the lack of mineral concentrate exports.
Cash costs for the period of US$594 per ounce sold were 42% lower than 2016
(US$1,031/oz), primarily driven by the build-up in unsold ounces and increased
investment in ore stockpiles as a result of increased focus on ore mining
(US$411/oz), lower consumable spend due to lower unit costs and optimisation of
cyanide usage (US$53/oz) and lower sales related cost due to lower sales
volumes (US$25/oz). This was partly offset by lower co-product revenue in the
form of copper concentrates (US$123/oz).
AISC per ounce sold of US$667 was 39% lower than 2016 (US$1,095/oz). This was
mainly driven by lower cash costs as explained above (US$437/oz). Should we
have been able to sell all ounces produced, AISC would have been approximately
US$564 per ounce.
Capital expenditure before reclamation adjustments of US$4.4 million was 21%
higher than 2016 (US$3.6 million). Capital expenditure for the year mainly
consisted of the expansion of the tailings storage facility (US$3.7 million).
As previously guided, Buzwagi is transitioning to a stockpile processing
operation in 2018 as a result of the effective completion of the open pit and
will see a step down in production as a result. During 2017 the mine exceeded
its production plan by 15,000 ounces whilst delivering over 5 million tonnes of
ore to the stockpile, albeit at lower grades. As a result expected life of mine
production has increased by approximately 100,000 ounces. In 2018, mill feed
will be almost exclusively from the stockpiles and as a result head grades are
expected to drop significantly resulting in production for the year being
approximately 100,000 ounces. As a result of the lower production and release
of non-cash high cost inventory of approximately US$200 per ounce, reported
AISC is due to increase to approximately US$1,100 per ounce sold, although we
are looking to optimise the cost profile as we transition to stockpile
processing.
North Mara
Key statistics
Three months ended 31 Year ended 31
December December
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced Oz 72,018 91,183 323,607 378,443
Ounces sold Oz 71,740 92,975 324,455 376,255
Cash cost per ounce sold1 US$/oz 587 436 498 410
AISC per ounce sold1 US$/oz 903 850 803 733
Open pit:
Tonnes mined Kt 3,572 4,182 15,299 15,556
Ore tonnes mined Kt 798 702 3,147 2,752
Mine grade g/t 1.7 2.1 1.7 1.9
Underground:
Ore tonnes trammed Kt 153 127 654 440
Mine grade g/t 7.7 11.0 8.7 15.6
Processing information:
Ore milled Kt 708 693 2,841 2,830
Head grade g/t 3.5 4.4 3.9 4.5
Mill recovery % 91.5% 92.1% 92.0% 92.0%
Cash cost per tonne milled1 US$/t 59 59 57 55
Capital Expenditure
- Sustaining capital2 US$ 5,370 13,739 22,563 28,317
('000)
- Capitalised development US$ 13,328 21,929 61,066 75,609
('000)
- Expansionary capital US$ 3,339 1,475 10,270 2,399
('000)
22,037 37,143 93,899 106,325
- Non-cash reclamation asset US$ (3,325) 3,319 (2,951) 6,703
adjustments ('000)
Total capital expenditure US$ 18,712 40,462 90,948 113,028
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 33 for definitions.
2 Includes land purchases recognised as long term prepayments
Operating performance
North Mara's gold production for the period of 323,607 ounces was 14% lower
than in 2016. This was as a result of a 13% lower head grade driven by 44%
lower mined grades received from the Gokona Underground due to an increased
proportion of ore being sourced from the lower grade West Zone. The head grade
was also negatively impacted by 11% lower grades received from the Nyabirama
pit as an increased proportion of ore was mined from the beginning of the Stage
4 of the open pit.
As North Mara solely produces gold in doré form it was unaffected by the
concentrate ban and gold ounces sold for the year of 324,455 ounces were
broadly in line with production, but 14% lower than 2016 due to the lower
production base.
Ore tonnes from underground mining were 49% higher than 2016, due to Gokona
Underground development providing access to more stopes compared to 2016
despite the underground development challenges experiences in the year due to a
now resolved lack of development contractors due to work permit issues.
Cemented Aggregate Fill (CAF) continues to be placed in primary stopes, though
further work is required on the plant to ensure that forecast fill volumes can
be maintained.
Cash costs of US$498 per ounce sold were 21% higher than 2016 (US$410/oz),
mainly driven by the lower production base (US$66/oz), lower capitalised
development cost (US$35/oz), higher consumable cost driven by higher CAF
activities (US$18/oz) as well as higher energy and fuel costs (US$11/oz). This
was partly offset by a build-up in ore stockpiles due to the higher ore tonnes
mined (US$31/oz) and lower external services cost (US$9/oz).
AISC of US$803 per ounce sold was 10% higher than 2016 (US$733/oz) primarily
due to higher cash costs as explained above (US$88/oz) and the impact of the
lower production base (US$51/oz), partly offset by lower capitalised
development costs (US$45/oz) and lower sustaining capital expenditure (US$18/
oz).
Capital expenditure for the year before reclamation adjustments of US$94.0
million was 12% lower than in the prior year (US$106.3 million). Key capital
expenditure include capitalised stripping costs (US$45.4 million), capitalised
underground development costs (US$15.7 million), capitalised drilling
expenditure mainly relating to Gokona resource and reserve development and
Nyabirama underground studies (US$9.4 million) and investment in mobile
equipment and component change-outs (US$4.9 million). In addition, US$1.6
million was spent on land acquisitions primarily around the Nyabirama open pit.
Land acquisition costs are included in capital expenditure above as they are
included in AISC but are treated as long term prepayments on the balance sheet.
In 2018 we expect production to be broadly in line with 2017 at approximately
325,000 ounces as the continued increase in production from the Gokona
Underground is offset by lower open pit tonnes and grade as the Stage 3 of the
open pit is completed and all ore is sourced from the Stage 4 pit. AISC is
expected to be approximately US$850 per ounce, approximately 5% higher than
2017, driven by an increase in cash costs due to the increased mining activity
and increased allocation of corporate shared services costs. During 2018 we
will continue to progress the drilling programmes at Gokona, which led to a
doubling of underground reserves in 2017 to 1.3Moz at a grade of 6.3 g/t and at
Nyabirama, we are also progressing the permitting of an underground exploration
decline which is expected to be completed in 2018.
Exploration Review
Brownfield Exploration
Tanzania
In 2017, brownfield exploration was focused predominantly at North Mara, with
underground diamond drilling at Gokona, and further surface diamond drilling
conducted on the Nyabirama deposit to define the mineralised system below the
planned final open pit. Drilling at North Mara during 2017 resulted in
significant additions to the Mineral Reserve and Mineral Resource. The surface
drilling demonstrated the potential for further resource potential up to 700
metres below the final Stage 4 Nyabirama pit. Underground drilling also
continued on the Reef 2 series at Bulyanhulu prior to suspension of underground
operations.
North Mara
Gokona Underground
In addition to the grade control drilling, approximately 33,000 metres of
infill and extensional diamond drilling was completed at Gokona Underground
during 2017; with a maximum of 5 underground diamond drill rigs in operation.
The positive results from the drilling, were incorporated into the year-end
Resource update and led to a doubling of Reserves from 656koz at 6.0g/t to
1,338koz at 6.3g/t, post depletion of over 188koz.
Significant drilling activity was focused on delineating the western extension
of the "Golden Banana" (East Zone) lode mineralisation between the Gokona Fault
and the completed Gokona open pit; which is now termed the "GB2" zone. Several
wide and high grade intercepts were returned from this drill programme
extending the previously modelled mineralisation including:
* UGKD320 * 33.0m @ 38.2 g/t Au from 36m
* UGKD321 * 31.0m @ 14.7 g/t Au from 31m
* UGKD323 * 24.8m @ 133.5 g/t Au from 35m
* UGKD328 * 52.0m @ 11.4g/t Au from 35m
* UGKD331 * 57.0m @ 31.8g/t Au from 54m
* UGKD349 * 10.0m @ 75.7g/t Ay from 64m
* UGKD_00303 * 26.0m @ 40.8g/t Au from 110m
* UKGC_00308 * 23.0m @ 42.7g/t Au from 121m
The full set of drill data for GB2 was incorporated into the updated Mineral
Resource model, and development was commenced to access the mineralisation
during the Q4 2017, and first stope production scheduled for Q1 2018.
The development of a drill drive on the 1030mRL elevation advanced in 2017,
with the initial four drill sites completed during Q3 2017. Drilling commenced
from three of these positions, with initial drilling targeting continuation of
mineralisation below the existing open pit. Initial results received during Q4
2017 included:
* UGKD415 * 22.0m @ 13.3g/t Au from 283m
* UGKD418 * 28.0m @ 12.5 g/t Au from 251m
* UGKD405 * 46.0m @ 6.6g/t Au from 197m
* UGKD409 * 10.0m @ 6.3g/t Au from 78m
* UGKD410 * 14.0m @ 7.8g/t Au from 71m
* UGKD425 * 15.0m @ 9.5g/t Au from 120m
Exploration activity during 2018 at Gokona Underground will continue to test
the extension of the known mineralisation, with 41,000m of underground diamond
drilling budgeted.
Nyabirama
Follow-up extensional and infill surface diamond drilling was completed at
Nyabirama during 2017, in order to test the extent of mineralisation
down-plunge from the open pit, and allow consideration of an underground mining
option. The better results from the 2017 drilling programmes included:
* NBD0149A 3.0m @ 66.6 g/t Au from 873m incl. 1m @ 198g/t Au from 874m, and
5.0m @ 4.8 g/t Au from 890m
* NBD0152 6.0m @ 51.9 g/t Au from 592m incl. 1m @ 280g/t Au from 594m
* NBD0157 4.0m @ 10.8g/t Au from 264m,
4.0m @ 26.7g/t Au from 325m, and
7.0m @ 9.50g/t Au from 464m
* NBD0158 11.5m @ 26.5g/t Au from 272m
* NBD0166 2.0m @ 87.9 g/t Au from 236m incl. 1m @ 161g/t Au from 237m, and
2.0m @ 6.5 g/t Au from 408m, and
3.0m @ 3.8 g/t Au from 420.0m
* NBD0167 5.0m @ 8.5 g/t Au from 464m incl. 1m @ 36g/t Au from 467m, and
7.0m @ 12.8 g/t Au from 473m incl. 1m @ 81g/t Au from 475m
* NBD0170 2.4m @ 7.6 g/t Au from 324m, and
5.2m @ 5.9 g/t Au from 366.8m, and
13.5m @ 20.1 g/t Au from 377.5m
Drilling completed in 2016 and 2017 was incorporated into an underground
Mineral Resource model. Following the Mineral Resource model update, a
provisional underground decline design was developed along with development for
drill positions to undertake infill diamond drilling. Permitting for the
decline is underway. The conceptual drilling programme involves eight drill
positions, and approximately 41,000m of diamond drilling to be completed
progressively as the development advances. In order to reduce expenditure
commitments, further drilling at Nyabirama was suspended in the Q3 2017. The
decision was also taken to defer any drilling until 2019, and hence reduce
expenditure commitments in 2018.
Bulyanhulu
Reef 2 Central
Underground diamond core drilling in 2017 was primarily focused on infill
drilling of Reef 2 to increase the level of confidence in the Mineral Resource,
and testing the Reef 1 structure in areas where limited to no historic drill
testing has been undertaken. A total of 117 underground diamond drill core
holes were completed for 30,412 metres during H1 2017, testing both the Reef 1
and Reef 2 structures. The results demonstrated that the Reef 2m Central vein
displays good continuity and extended the mineralisation a further 100m
vertically, and a further 150m in strike. Drilling activity at Bulyanhulu was
suspended in the second half of 2017, as the mine was moved to Reduced
Operations.
Greenfield Exploration
Kenya
During 2017 an extensive diamond drilling programme continued on the Liranda
Corridor Project within the Kakamega Dome Camp with between four and seven
drill rigs active. 86 diamond core ("DD") holes (41,988 meters) were completed
on the Isulu (formerly Acacia), Bushiangala, Shigokho and Shibuname Prospects.
Additionally, one reverse circulation (RC) rig completed reconnaissance
drilling across gold-in-soil anomalies on the Barkalare and Kitson-Kerebe
target areas in the Lake Zone Gold Camp with 30 reverse circulation holes
("RC") (3,250 metres) drilled.
Kakamega Dome Camp
Exploration activity has focused on the Bushiangala and Isulu (formerly Acacia)
prospects since high grade results were returned in 2014 from the first pass
diamond drilling programme following up gold-in-soil anomalies along the
Liranda Corridor. In 2015 and 2016 closed spaced diamond drilling programmes
were undertaken confirming multiple zones of mineralisation from 100 metres to
700 metres vertical depth at Isulu and from 100 metres to 400 metres at
Bushiangala. In 2017 a diamond drilling program of 44,500m was budgeted in
order to finalise a Maiden Inferred Resource Estimate on the Isulu Prospect in
Q1 2017 and to further understand the potential size of the mineralised zones
(lateral and depth extensions). A total of 79 diamond holes for 39,062 metres
were completed on these prospects in 2017. Better results received during 2017
from the Isulu and Bushiangala Prospects included:
Isulu Prospect (formerly Acacia)
* LCD0158W1* - 2.5m @ 114 g/t Au from 892m and 1.0m @ 11.0 g/t Au from 898m,
* LCD0158W3* - 3.7m @ 10.7 g/t Au from 925m and 0.6m @ 21.0 g/t Au from 931m,
* LCD0161W1*? - 2.0m @ 37.0 g/t Au from 995m and 1m @ 21.5 g/t Au from
1,003m,
* LCD0161W3* - 2.0m @ 8.49 g/t Au from 958m and 4.0m @ 2.27g/t Au from 972m,
* LCD0175*? - 3.0m @ 55.2 g/t Au from 129m,
* LCD00194 -1.5m @ 37.2 g/t Au from 342.3m,
* LCD00201 -1.5m @ 15.2 g/t Au from 114m.
Bushiangala Prospect
* LCD0173*? - 3.1m @ 7.07 g/t Au from 187m,
* LCD0174*? - 3.5m @ 6.70 g/t Au from 154m,
* LCD0176*? - 1.5m @ 12.0 g/t Au from 134m and 3.1m @ 12.0 g/t Au from
175m,
* LCD0177*? - 1.5m @ 10.5 g/t Au from 114m,
* LCD0189* - 2.0m @ 12.7 g/t Au from 164m,
* LCD0192* - 2.0m @ 23.1 g/t Au from 166m
Note: * - holes reported during Q3 2017. ? Holes included in Q4 2017 Inferred
Resource Estimate.
The gold mineralisation at Isulu is associated with mostly steeply dipping
shear zones ranging in true width from 0.5 metres to 17 metres within a mafic
volcanic sequence. The zones are represented by shearing, brecciation, quartz
veining, sulphides (pyrite, +/-pyrrhotite, +/-sphalerite, +/-arsenopyrite, +/
-chalcopyrite, +/- molybdenite) and alteration (carbonate, +/- sericite, +/-
vanadium mica, +/- silica). Within the shears a total of 9 mineralised zones
have been modelled with a maximum strike length of 514m. Vertical extent ranges
from 300m to 1000m while the plunge extent ranges from 300m to 1100m. The
majority of the resource ounces lie within 4 zones. The structures remain open
at depth and to the east down plunge.
At Bushiangala the gold mineralisation is modelled in four zones contained
within shears characteristically similar to Isulu. These zones have a maximum
strike length of 304m with a vertical extent ranging from 284m to 556m. The
structures continue to the east and down dip.
In Q1 2017 a Maiden Inferred Resource Estimate conforming to NI 43-101
guidelines was announced for the Isulu prospect, of 3.46 million tonnes at 12.1
g/t Au for 1.31 million ounces. An updated Inferred Resource Estimate was
completed using drill data and interpretations to the end of August 2017; with
the updated model showing that the Isulu Inferred Resource has changed with
additional drilling confirming structural complexity.
The enhanced modelling of the Isulu resource has upgraded confidence and
increased grade, although has led to reduced ounces. Additionally the upper
parts of two zones in the Bushiangala Prospect were upgraded from mineral
inventory to an Inferred Resource Estimate. The updated Inferred Resource
Estimate completed for the year-end returned 2.5 million tonnes @ 12.9 g/t Au
for 1.044 million ounces at Isulu and for Bushiangala 374,600 tonnes @ 10.5 g/t
Au for 126,600 ounces. A technical study to determine mineability of these
deposits was commenced in Q4 2017. We continue to believe that 2Moz is a
resource target for the Liranda Corridor Project which we plan to continue
drill testing for in 2018.
In 2017 testing for further potential shoots within 5km along strike from
existing resources at Isulu and Bushiangala was undertaken. At Shigokho and
Shibuname Prospects 7 holes were completed for 2924m. Best results were from
Shibuname included LCD0181 6.6m @ 3.12 g/t Au from 200.4m and 3m @ 4.71 g/t Au
from 218m, LCD0183 0.6m @ 3.48 g/t Au from 400.9m. Although encouraging more
detailed structural work is required to understand the potential of these
prospects and if further drilling is warranted.
Lake Zone Camp
RC drilling on gold-in-soil anomalies at Barkalare and Kitson-Kerebe Target
areas was completed in Q3 2017 with 30 RC holes for 3250m. Best intercept
included LZRC0088 (Barkalare) 4m @ 5.43 g/t Au from 52m and LZRC0097 (Kerebe)
5m @ 3.09 g/t Au from 23m and 2m @ 10.05 g/t Au from 60m. In 2018, drill
testing of these significant intercepts along strike and down dip will be
undertaken. In addition further geological mapping and infill soil sampling
across untested soil anomalies within the Lake Zone is underway to bring these
targets to drill testing stage.
Burkina Faso
During 2017 we continued to explore our properties in the highly prospective
Houndé Belt in southwest Burkina Faso. Acacia currently has four joint ventures
and an interest in over 2,700km2 of prospective greenstone belt. Acacia manages
all of the joint ventures. Extensive drilling programmes, including diamond,
reverse circulation and air-core drilling, were completed in 2017 on the
projects. A component of the 2017 work programmes was to review the structural
architecture of our land holdings and complete a target generation exercise
using airborne aeromagnetic and radiometric data and ground IP geophysical data
where available. These target generation layers are now being synthesised with
our surface geochemical data layers to develop priority drilling targets. To
date we have delineated more than 65 targets, most of them were followed up by
field mapping in Q4. This program was aimed to produce additional geology data
to update the target ranking and to design 2018 exploration.
South Houndé Joint Venture (Sarama Resources Limited) - current ownership 50%,
next stage earn-in to 70% (end 2018)
At the South Houndé JV project we continued field-based exploration activities
focused both on resource extensions to the Tankoro Resource area (MM and MC
zones), the Tankoro Corridor prospects (Tankoro SW, Guy, Phantom and Phantom
East) and regional targets (Ouangoro, Tyikoro, Poyo/Werienkera and Bini West).
Acacia commenced management of the South Houndé JV as of 1st January 2017.
During 2017 a total of 34,165 metres AC, 3,051 metres of RC and 6,664 metres of
diamond core were drilled. Mapping and surface sampling was conducted on the
regional prospects.
Field mapping and sampling focused on the best targets on the Tankoro Corridor
and on regional prospects. The ranking of the targets has been updated and an
exploration programme was designed for 2018.
The exploration budget for the South Houndé project in 2018 is US$3.8 million,
comprising 7,000 metres of diamond core drilling, 8,000 metres of reverse
circulation drilling, and 32,000 metres of aircore drilling. A resource update
is planned for Q1 2018. Additionally mapping, soil sampling and pole-dipole
gradient array induced polarisation geophysical surveys will be carried-out.
The aim of this programme is to extend current resource on the Tankoro corridor
and to assess the potential of the regional targets to deliver 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.
Tankoro - MM and MC Zones
During 2017 we continued a programme of drilling to test the down-plunge
extensions of higher grade gold mineralisation related interpreted cross
structures at the MM and MC Zones within the Tankoro resource. A "results
based" phased strategy has been adopted "cycling" the rig between the
Chewbacca, Yoda, Anakin and Jabba zones within the MM and MC parallel
mineralised zones. All holes drilled to date have intersected the targeted
porphyries and cross structures, however, in most cases the interpreted
high-grade shoots are either of lower grade, or of shorter strike extent than
expected. The best potential at this stage appears to be depth extensions on
the MC Zone where drilling has identified multiple mineralised porphyries and
gold mineralisation in the surrounding intercalated sediments.
Better results from MM and MC Zone included:
* FRC1070 - 11.35m @ 3.50g/t Au from 397.5m including 6.5m @ 5.02g/t Au
* FRC1075 - 6.86m @ 6.83g/t Au from 173.15m including 2m @ 18.8g/t Au, and
3.35m @ 8.17g/t Au from 236.5m
* FRC1076 - 3.2m @ 22.5g/t Au from 231m,
* FRC1083A - 3.5m @ 3.79g/t Au from 406.5m (including 1m @ 8.75g/t Au), 1.85m
@ 8.03g/t Au from 429.85m and 1.05m @ 5.19g/t Au from 504m;
* FRC1076 - 6m @ 11.9g/t Au from 231m, 6.7m @ 3.80g/t Au from 240.8m
(including 4m @ 6.12g/t Au)
* Phantom East - FRC1081 - 1.85m @ 6.83g/t Au from 173.65m;
* Phantom East - FRC1053RE1 - 5.5m @ 4.88g/t Au from 120m and 9m @ 4.85g/t
Au from 129.5m,
* Phantom - FRC1088 - 2.45m @ 2.42g/t Au from 145.4m,
* Phantom West - FRC1091 - 4.25m @ 2.12g/t Au from 248.45m.
The geology model for the Tankoro resource has been updated in Q4 2017. Early
in 2018 a mineral resource estimation update is expected to be completed along
with additional metallurgic test work. 2018's drilling programme across the
resource area, will follow-up on the most prospective deep high-grade shoots,
locate repetitions of high grade shoots by in-filling existing drill fences and
test partially tested geophysics trends.
At Djimbake (south-western extension of the Tankoro resource area) detailed
geology and regolith mapping, associated with rock-chip and termite mound
sampling, was carried-out to assist with the interpretation of the soil and
recent drilling data. The 2018 programme will consist of follow-up aircore and
reverse circulation drilling to test the continuity of the mineralisation along
strike and at depth.
On the Ben potential new mineralised trend, located West of the resource area,
detailed mapping and rock-chip and termite mound sampling showed the presence
of significant hydrothermal alteration associated with strong foliation. The
2018 programme will consist of gradient array induced polarisation geophysical
surveys, additional soil sampling and following aircore drilling.
Ouangoro Anomaly
Aircore drilling commenced at the beginning of February on the Ouangoro Anomaly
with regional traverses across a 15 kilometre x 4 kilometre zone of
semi-continuous gold-in-soil geochemical anomalism along an interpreted
NNE-trending linear geophysical anomaly being drilled. Encouraging results have
been returned from all traverses but so far no economic grade has been
encountered.
Gold mineralisation and anomalism in drill chips, and observed in artisanal
workings, is typically associated with quartz veins in sheared siltstone and
sandstone units intruded by interpreted quartz-feldspar porphyries, with
fresher drill chips show carbonate and silica-sericite alteration. Q4 2017
field activity mostly focused on the 5km long Yankadi zone which represents the
best continuity of gold mineralisation and hydrothermal alteration along the
corridor.
Detailed geology and regolith mapping, associated with rock-chip and termite
mound sampling, confirmed the presence of strong hydrothermal alteration,
prospective cross-cutting structures and significant artisanal mining workings.
The 2018 programme will consist of gradient array induced polarisation
geophysical surveys, aircore, reverse circulation and diamond drilling. The aim
of the programme is to confirm the continuity of the mineralisation.
Tankoro Southwest Extension
AC drilling was completed across multiple IP-geophysical and gold-soil
geochemical targets on the southwest extensions of the Tankoro resource trend,
known as the Djimbake area. The drilling was following up anomalous AC drill
results from 2016, testing the southern extension of the Kenobi Trend, and
testing for new mineralised zones. Assay results were encouraging and included:
* 4m @ 1.46g/t Au 10m @ 1.73g/t Au
* 8m @ 1.19g/t Au 4m @ 1.17g/t Au
* 8m @ 2.57g/t Au 8m @ 4.25g/t Au
* 6m @ 1.33g/t Au 6m @ 1.99g/t Au
Gold anomalism in the AC drilling occurs in weathered and altered sediments and
porphyritic intrusive rocks with observed alteration being carbonate, sericite
and kaolinite; minor quartz veining was also observed co-incident with some
better zones of gold anomalism. Planned follow-up drilling includes infill and
step-out AC traverses as well as some RC and diamond core drilling to determine
the significance of the shallow oxide gold mineralisation and orientation/
controls in fresh rock.
Central Houndé Joint Venture - current ownership 51%, potential to earn 80%
Surface geochemical sampling undertaken has identified several very encouraging
zones of gold anomalism coincident with the interpreted NE-trending
Legue-Bongui structural corridor, including an 8km x 2km anomalous gold zone.
Additional interpretative work has identified 35 targets associated with mapped
alteration, artisanal sites, mineralised rock chips and/or pathfinder
geochemistry warranting follow-up. During mapping a number of west-north west
trending mineralised structures were identified in the Legue NW Corridor, and
rock chips taken along these structures returned a number of significant
results. In total 21 of 49 rock chip samples returned assays >0.1g/t up to
77.4g/t gold, including assays of 5.95g/t, 19.1g/t, 28.1g/t, 62.8g/t and 77.4g/
t. The anomalous rock chip samples are associated with sheared mafic volcanic
rocks and boudinaged quartz vein zones.
Reverse circulation drilling was completed in the Legué-Bongui Corridor to
follow-up best results from previous drilling. 21 RC holes were drilled for an
aggregate of 2,797 metres. Best results are:
* CHRC00050- 6m @ 0.57g/t Au from 80m, including 2m @ 1.19g/t Au; 2m @ 1.83 g
/t Au from 95m and 2m from 1.83g/t Au, including 1m @ 2.47g/t Au (ended in
mineralisation)
* CHRC00051- 7m @ 0,97g/t Au from 144m, including 3m @ 1.88g/t Au
* CHRC00052- 12m @ 1.40 g/t Au from 59 m, including 3m @ 2.60g/t Au from 66m
and 1m @ 4.03g/t from 67m and 13m @ 0.69g/t Au from 87m including 7m @ 1g/t
Au from 82m
* CHRC00054- 16m @ 0.51g/t Au from 61m including 5m @ 1.01g/t Au from 77m
* CHRC00056- 1m @ 1.58g/t Au from 7m.
The exploration programme for the Central Houndé project in 2018 comprises
11,500 metres of aircore drilling. Elements of the drilling will be converted
to reverse circulation drilling if the regolith profile is stripped. Additional
geology and regolith mapping, soil sampling and gradient array induced
polarisation geophysical surveys are also comprised in the plan. The aim of the
programme is to advance targets to drill testing phase (Légué-Bongui Corridor
and Ouéré) and to delineate new exploration targets.
Pinarello & Konkolikan Joint Venture (Canyon Resources Limited)
During 2017 Acacia has earned 75% equity in the project and we have therefore
entered the contributory/dilution phase of the JV agreement. Canyon Resources,
our joint venture partner has elected to dilute, and the current programmes
will increase Acacia's equity to approximately 89%.
Surface geochemical sampling undertaken over the past 2 years has identified
several very encouraging zones of gold anomalism coincident with the
interpreted structural corridors, magnetic features and surface IP geophysical
anomalies. During the quarter we completed a structural targeting exercise,
reviewed the surface gold anomalies from soil sampling, and undertook
multi-element geochemical analysis, using a portable XRF, of all samples from
the regional soil sampling programmes. As a result of this targeting exercise
we delineated 28 targets across the Pinarello project area, and we commenced
field validation, geological mapping and further surface sampling programmes on
priority target areas.
A total of 1,073 soil samples, 23,089 metres of aircore drilling and 6,401
metres of RC drilling have been completed during 2017. Results from aircore
drilling along the Tangalobe and Tankoro Corridor South is considered positive
with better results of:
* 3m @ 0.77g/t
* 3m @ 0.72g/t Au
* 4m @ 1.64g/t Au
* 2m @ 6.0g/t Au
* 6.0m @ 1.18 g/t Au
* 8m @ 0.52g/t Au
Mineralisation is mostly associated with quartz veins, oxidised sulphides and
haematite.
Results from RC drilling were mixed with broad zones of gold anomalism and
narrow higher grade zones intersected at the Gaghny Prospect whilst hole
PIRC0039 on the northern Pinarello licence following up the projected extension
of the Tankoro Trend intersected 6m @ 11.1g/t Au from 28m, including 2m @ 32.4g
/t Au from 28m. An infill soil sampling program was completed in Q4 on the
Niodera license. A total of 1,252 samples were collected. Last results are
still awaited. Processing and interpretation of the results will be done early
next year.
The exploration plan for the Pinarello & Konkolikan project in 2018 comprises
30,000 metres of aircore drilling. Part of the drilling will be converted to
reverse circulation drilling if the regolith profile is stripped. The aim of
the program is to push more advance targets to target testing phase (Tankoro
Corridor South, Tangolobe and Gagnhy) and to delineate new exploration targets.
Frontier JV (Metallor SA) - earning 100% through option payments
Regional regolith and geological mapping has been completed for both licences
(Badoura and Canra). A regional 800m x 400m reconnaissance BLEG soil sampling
programme, combined with termite mound, rock chip and quartz lag sampling
programmes has been completed. This work has identified a number of significant
large scale gold-in-soil anomalies (soils up to 3g/t Au). A 200m x 200m infill
commenced but has been completed. A total of 6,035 soil, 44 rock chip and 1,043
termite samples were collected during. In addition to this a detailed
structural magnetic interpretation and targeting exercise was done. This
interpretation integrated geological and regolith mapping, Landsat, Aster and
recently acquired high resolution airborne magnetic and radiometric data. A
number of high quality targets have been selected for reconnaissance Aircore
drilling. An infill soil sampling program was completed in Q4 on the Badoura
license. A total of 1,013 samples were collected. Processing and interpretation
of the results will be done Q1, 2018.
The exploration budget for the Frontier project in 2018 comprises 6,000 metres
of aircore drilling. Part of the drilling will be converted to reverse
circulation drilling if the regolith profile is stripped. The aim of the
programme is to delineate new exploration targets.
Mali
In Mali we continued to delineate surface gold-in-soil anomalies, already
defined in late 2016, through mapping and surface IP geophysical surveys, and
commenced drilling programmes on the resultant targets. At the same time, we
continued to build our land position in the Senegal-Mali Shear Zone (SMSZ) with
a the grant of a further two land packages, one under joint venture (Bou Bou)
and the other 100% Acacia (Gourbassi), Acacia now holds 5 exploration permits
covering 191km2 on the SMSZ.
Tintinba - Bane Project - earning 95% through option payments
The Tintinba-Bane Project consists of three permits covering approximately
150km2. These properties are located within the Kénéiba Inlier of Western Mali,
along the world class Senegal-Mali-Shear-Zone (SMSZ), which hosts more than 50
million ounces of gold endowment. During the year, a ground-based gradient
array induced polarisation geophysical survey was completed (31 line km) and
interpreted. Results from IP, soils, drilling and mapped and interpreted
geology have been used to refine existing and define new targets for drill
testing. At least 25 targets with co-incident IP chargeability, resistivity,
and surface gold-in-soil anomalism have been identified. RC drilling commenced
in mid-March 2017 aimed at testing around 18 targets in total with single drill
fences to test for gold mineralisation and to understand the geology and
alteration of each target in order to rank these targets moving forward. RC
drilling has returned positive results, from 8 of 13 gold anomalies, including:
* 4m @ 18.7g/t Au
* 4m @ 5.62g/t Au
* 13m @ 1.11g/t Au
* 15m @ 0.50g/t Au
* 13m @ 0.50g/t Au
* 7m @ 1.01g/t Au
Given the discovery history of several >3Moz deposits in the SMSZ, these
results and the associated alteration on essentially single RC fences, across
large-scale gold-in-soil anomalies can be considered very significant and
warrant follow-up drilling
Reverse circulation drilling continued on selected targets in Q4 2017 with 42
holes for 4,987 meters. Drilling started on November 26th and ended on January
5th. The aim of the drilling was to follow-up best mineralised intersections
from H1 drilling (Zadie and Manjro targets) and to delineate new targets
(Karité, Tribala and Sounsou). Best results are below with parts of the assays
still outstanding:
* 2m @ 2.14g/t Au
* 4m @ 1.44g/t Au
* 3m @ 0.95g/t Au
* 1m @ 5.51g/t Au
* 1m @ 5.51g/t Au
Portable XRF analysis of soil and drilling samples was completed in Q4 2017.
The interpretation of the results showed that gold anomalies sit on or close to
different "lineaments" (regional trends, splays and possibly conjugate shears).
The exploration budget for the Tintinba - Bane project in 2018 comprises 1,500m
of diamond drilling and 10,000m of reverse circulation drilling. The program
will be revised when all results from the Q4 2017 drilling is received and
interpreted. The aim of the programme is to push the best targets (Manjor,
Zadie) to advanced exploration stage and to continue testing other targets
(Néré, Goni, Karité, Tribala, Sounsou and Bouyagui).
Bourdala JV - earning 100% through option payments
The Bourdala JV is a joint venture with a local company over the Bou Bou
licence located approximately 15km from the centroid of the Tintinba JV further
to the south. The property is located within the central portion of the
Kedougou-Kenieba Inlier and just to the east of the highly prospective
Senegal-Mali Shear Zone. Acacia can earn up to 100% of the project through a
series of staged payments over a period of 36 months.
During 2017, six RC holes for 800 metres were completed across the Bou Bou
Artisanal Prospect on the Bourdala JV licence. These returned anomalous results
including: BORC005: 64m @ 0.23g/t from 10m, BORC004: 26m @ 0.31g/t from 72m and
26m @ 0.58g/t from 104m. These results are encouraging given that the results
occur in consecutive holes on the drill traverse and define a 50 metre wide
zone of gold anomalism, within a 2km long artisanal site.
The exploration plan for the Bourdala JV in 2018 comprises 1,200m of reverse
circulation drilling, 1,500m of air-core drilling and 2,000 soil samples. The
aim of the programme is to follow-up the mineralised intersects from H1
drilling and to generate new targets.
Gourbassi Est - 100% Acacia (ABD Exploration Mali SARL)
During H1 2017, the Gourbassi Est convention was signed and arête for the
licence was received. The licence is located immediately west of the Tintinba/
Bane Project in the central Senegal Mali Shear Zone area of the
Kedougou-Kenieba Inlier. The property is located to the west of the SMSZ in an
area dominated by footway splays to the SMSZ. The programme for H2 2017 was to
review the historic data and complete mapping and surface sampling programmes.
The exploration plan for the Gourbassi project in 2018 comprises 1,500m of
air-core drilling and 3,000 soil samples. The aim of the programme is to
generate exploration targets.
Tanzania
Nyanzaga Joint Venture
During the period, OreCorp Limited published the results of the Pre-Feasibility
Study ("PFS") on the Nyanzaga Project. The PFS, led by Lycopodium Minerals Pty
Ltd of Perth, Western Australia, delivered an optimal development scenario of a
4Mtpa concurrent open pit ("OP") and underground ("UG") operation for
pre-production capital costs estimate of US$287 million, which includes a US$33
million contingency. The concurrent mining schedule significantly reduced the
low grade stockpiling scenario considered in the Scoping Study and increased
the OP contained ounces and life of mine ("LOM") average mineralised material
grade processed from 1.9 g/t gold in the Scoping Study to 2.0 g/t (+5%). Based
on the PFS, the Project is expected to deliver an average gold production of
213koz per annum over a 12 year LOM, peaking at 249koz in Year 3 and totalling
approximately 2.56Moz of gold produced over the LOM. The AISC and AIC are
estimated to be US$838/oz and US$858/oz respectively over the LOM (excluding
initial capital expenditure). Acacia and OreCorp have agreed the scope of the
Definitive Feasibility Study ("DFS") and this commenced in the Q2 2017.
OreCorp and Acacia continue to review and seek advice on the impact of the new
legislation in Tanzania on the Nyanzaga Project. OreCorp has published an
analysis of their preliminary view of the impact of the legislation which can
be found on their website (www.orecorp.com.au) and indicates that the
legislation may potentially have an adverse effect on the Nyanzaga Project. As
a result we have recorded an impairment charge of US$12 million for the
Nyanzaga Project to reflect the current estimate for the potential impact of
the new mining laws on the carrying value of the project, which now stands at
US$34 million.
Financial Review
The impact of the gold/copper concentrate export ban is evident in our
financial performance, and most notably in cash flow generation. However, in an
effort to minimising the impact, we have further increased our focus on cost
control, cash flow management and capital allocation. The key aspects of our
financial performance for 2017 is summarised below, and should be read in
conjunction with the consolidated condensed financial information:
* Revenue of US$751.5 million was US$302.0 million lower than 2016 driven by
the 27% decrease in sales volumes mainly as a result of our inability to
sell gold/copper concentrate which deferred approximately US$264.0 million
in gross revenue and reduced production at Bulyanhulu due to the transition
to reduced operations in Q4 2017. This was partially offset by
approximately US$11.3 million due to the higher gold price compared to
2016.
* Cash costs decreased to US$587 per ounce sold in 2017 from US$640 per ounce
sold in 2016 despite the lower production base, lower cash costs were
driven by lower G&A costs, lower consumable and maintenance costs, lower
sales related costs, lower fuel costs, lower external services costs,
higher realised gains on copper hedges and lower labour costs, partly
offset by the lower production base, lower co-product revenue and lower
capitalisation of development costs.
* AISC of US$875 per ounce sold was 9% lower than in 2016 (US$958 per ounce
sold), mainly due to lower capitalised development cost, lower sustaining
capital expenditure, the share based payment credit driven by the decrease
in the Acacia share price and lower cash costs, partly offset by the impact
of lower sales volumes on individual cost items.
* As a result of the above and in combination with higher corporate
administration charges driven by higher legal costs due to the concentrate
export ban and outstanding tax matters, EBITDA decreased by 38% to US$257.2
million.
* Gross impairment charges of US$850.2 million (net US$644.3 million)
following the carrying value review conducted in light of changes in the
operating environment in Tanzania, and by reference to the key terms of the
Framework announcements made by Barrick and by the GoT in October 2017.
This is made up of US$838.0 million relating to Bulyanhulu and US$12.2
million relating to Nyanzaga.
* Tax credit of US$2.3 million compared to the prior year expense of US$147.1
million. The current year charge is driven by additional provisions raised
for uncertain tax positions of US$172 million based on estimates of the
impact of a comprehensive settlement reflecting the key terms of the
Framework announcements by Barrick and the GoT, offset by the deferred tax
impact relating to impairment charges noted above of US$205.9 million;
* As a result of the above, the net loss amounted to US$707.4 million,
compared to net income in 2016 of US$94.4 million.
* Adjusted net earnings of US$146.2 million were US$14.8 million lower than
2016. Adjusted earnings per share amounted to US35.7 cents, down from
US39.2 cents in 2016.
+ Operational cash outflows of US$23.0 million compared to US$318.0
million of inflows in 2016, primarily as a result of lower revenue as
discussed above, unfavourable working capital outflows due to a
build-up of gold inventory and supplies, an increase in the indirect
taxes receivable, and payments of US$37.9 million relating to
provisional 2017 and final 2016 corporate tax.
The following review provides a detailed analysis of our consolidated results
for the 12 months ended 31 December 2017 and the main factors affecting
financial performance. It should be read in conjunction with the unaudited
consolidated financial information and accompanying notes on pages 38 to 64,
which have been prepared in accordance with International Financial Reporting
Standards as adopted for use in the European Union ("IFRS").
Revenue
Revenue for 2017 of US$751.5 million was US$302.0 million lower than 2016 due
to a 27% decrease in gold sales volumes from Bulyanhulu and Buzwagi (223koz),
primarily driven by the ban on export of mineral concentrates from early March
2017, and reduced production at Bulyanhulu due to the transition to reduced
operations in Q4 2017, partly offset by a 2% increase in the average net
realised gold price from US$1,240 per ounce sold in 2016 to US$1,260/oz in
2017.
The net realised gold price for the year of US$1,260/oz was US$3/oz higher than
the average market price of US$1,257/oz due to the impact of gold price
protection measures in the form of put options entered into in September 2017
of US$2.7 million. These options had a strike price of US$1,300 with full
exposure to gold prices above that level.
Included in total revenue is co-product revenue of US$7.2 million for the 2017
year, 82% lower than the prior period (US$39.1 million). This was as a result
of the lack of concentrate sales from March 2017 as a result of the export ban
relating to gold/copper concentrate. The 2017 average realised copper price of
US$2.98 per pound compared favourably to that of 2016 (US$2.21 per pound), and
was mainly driven by the higher market price for copper. The benefit of a
higher copper price is however not fully reflected in 2017 revenues due to the
inability to sell copper.
The impact of the ban during the year has resulted in a build-up of
approximately 185,800 ounces of gold contained in unsold concentrate. In
addition, we have approximately 12.1 million pounds of copper and 158,900
ounces of silver contained in unsold concentrate. If these had been sold, gross
revenue and cash flow would have increased by approximately US$264.0 million
and US$240.0 million respectively based on average spot prices in the year.
Cost of sales
Cost of sales was US$458.4 million for 2017, representing a decrease of 37% on
the prior year period (US$727.1 million). The key aspects impacting the cost of
sales for the year include a 37% reduction in direct mining costs, primarily
driven by higher capitalised mining costs including a credit of approximately
US$94.2 million relating to a build-up of finished gold ounces, combined with
lower activity at Bulyanhulu due to the move to reduced operations, lower
depreciation and amortisation costs as a result of the lower production base at
Bulyanhulu and lower sales related cost due to lower sales volumes, partly
offset by higher realised gains on gold put options.
The table below provides a breakdown of cost of sales:
Three months ended 31 Year ended 31
(US$'000) December December
(Unaudited) 2017 2016 2017 2016
Cost of Sales
Direct mining costs1 70,773 132,937 299,591 479,022
Third party smelting and refining 1,439 6,360 9,675 25,588
fees
Realised losses on economic hedges 128 1,004 743 9,619
Realised (gains)/losses on gold (2,693) 487 (2,693) 1,818
hedges
Royalty expense 14,035 11,808 44,930 47,237
Depreciation and amortisation* 25,260 43,718 106,201 163,796
Total 108,942 196,314 458,447 727,080
1 Net of Bulyanhulu reduced operations cost (ROP).
* Depreciation and amortisation includes debits relating to the depreciation
component of the cost of the draw down in the quarter of US$0.1 million for Q4
2017 (Q4 2016: US$3.0 million) and credits due to the cost build-up in
inventory US$26.9 million for 2017 (2016: US$2.6 million).
A detailed breakdown of direct mining expenses is shown in the table below:
Three months ended 31 Year ended 31
(US$'000) December December
(Unaudited) 2017 2016 2017 2016
Direct mining costs
Labour 14,067 24,006 83,238 90,013
Energy and fuel 15,454 24,082 80,461 89,757
Consumables 15,855 26,248 85,698 105,152
Maintenance 16,576 30,807 92,603 111,451
Contracted services 24,788 37,226 124,592 133,734
General administration costs 15,620 23,541 77,546 86,761
Gross direct mining costs 102,360 165,910 544,138 616,868
Bulyanhulu Reduced (13,687) - (14,227) -
Operations cost1
Capitalised mining costs (17,900) (32,973) (230,320) (137,846)
Total direct mining costs 70,773 132,937 299,591 479,022
1 Includes non-sustaining costs relating to Bulyanhulu reduced operations cost
(ROP).
Gross direct mining costs of US$544.1 million for 2017 were 12% lower than 2016
(US$616.9 million). The overall decrease was driven by the following:
* A 11% decrease in G&A costs driven by lower stock write downs, lower
logistic and warehousing cost and lower camp costs at Bulyanhulu as well as
lower aviation costs at all sites;
* A 19% decrease in consumable costs mainly driven by lower usage at
Bulyanhulu and improved consumable unit costing and usage optimisation at
other sites;
* A 17% decrease in maintenance costs mainly at Bulyanhulu due to the
transition to reduced operations in combination with initiatives to improve
planned maintenance activities;
* A 10% decrease in energy and fuel costs mainly driven by lower usage at
Bulyanhulu and improved supply of Tanesco;
* A 8% decrease in labour costs mainly at Bulyanhulu due to a decrease in
headcounts as part of the transitioning to reduced operations
* A 7% decrease in contracted services mainly at Bulyanhulu due to the
transition to reduced operations resulting in the halting of underground
mining and development activities.
Capitalised direct mining costs, consisting of capitalised development costs
and investment in inventory is made up as follows:
Three months ended 31 Year ended 31
(US$'000) December December
(Unaudited) 2017 2016 2017 2016
Capitalised direct mining
costs
Capitalised development (12,212) (33,704) (89,388) (119,905)
costs
Investment in inventory (5,688) 731 (140,932) (17,941)
Total capitalised direct (17,900) (32,973) (230,320) (137,846)
mining costs
Capitalised direct mining costs were 67% higher than 2016, primarily driven by
a build-up of gold ounces in concentrate at Bulyanhulu and Buzwagi resulting in
an investment in inventory of US$140.9 million. The decrease in capitalised
development cost mainly relate to halting of development activities at
Bulyanhulu following the transition to reduced operations, and at North Mara,
due to a decrease in capitalised stripping relating to the Nyabirama Cut 4
cutback and lower underground waste development.
Central costs
Total central costs amounted to US$18.7 million for 2017, a 64% decrease on
2016 (US$51.8 million) mainly driven by a non-cash share based payment
revaluation credit as a result of the lower share price and share price
performance compared to 2016, specifically when compared to our peers and the
global mining index, impacting on the valuation of future share-based payment
liabilities to employees. Acacia's share price decreased by approximately 47%
compared to December 2016. This was partly offset by a 23% increase in
corporate administration costs as a result of higher legal costs amounting to
approximately US$10 million relating to the concentrate export ban and other
matters.
Three months ended 31 Year ended 31 December
(US$'000) December
(Unaudited) 2017 2016 2017 2016
Corporate administration 7,613 6,218 26,913 21,895
Share-based payments 186 (9,795) (8,236) 29,929
Total central costs 7,799 (3,575) 18,677 51,824
Exploration and evaluation costs
Exploration and evaluation costs of US$24.8 million were incurred in 2017,
marginally higher than the US$24.0 million spent in 2016. The key focus areas
for the year were greenfield exploration programmes in West Kenya amounting to
US$12.9 million and greenfield exploration programmes in West Africa amounting
to US$10.3 million.
Corporate social responsibility expenses
Corporate social responsibility costs incurred in 2017 amounted to US$8.2
million compared to the prior year of US$10.7 million. Corporate social
responsibility overheads and central initiatives in 2017 amounted to US$4.6
million and were in line with 2016. In addition, general community projects
funded from the Acacia Maendeleo Fund amounted to US$3.6 million, which was
US$2.5 million lower than in 2016, driven by the timing of projects and the
number of qualifying initiatives identified.
Impairment charges
Acacia has identified a number of potential triggers for impairment testing of
the carrying value of its assets, including but not limited to, the challenges
experienced in the operating environment in Tanzania, the announcement of new
legislation by the GoT in respect of the natural resources sector and Acacia's
decision to reduce operations at Bulyanhulu, As a result, Acacia has undertaken
a carrying value review of the Group's affected Cash Generating Units (CGUs).
Acacia considers that in accordance with applicable accounting standards,
carrying values for the CGUs should now be calculated by reference to the key
terms of the Framework announcements made by Barrick and by the GoT in October
2017 and discussed above, with additional discounting to reflect the
uncertainty around the final terms of any comprehensive settlement that might
be reached.
The review demonstrates a potential reduction in value at all three assets, but
Buzwagi and North Mara have sufficient headroom above their current carrying
values. At Bulyanhulu, however, the impact of the changes was greater, due to
the long life of the mine and the delay to a return to positive cash generation
including due to the move to reduced operations. The review resulted in a net
impairment of US$632 million for Bulyanhulu, which includes pre-tax write-downs
of US$122 million for goodwill and US$30 million for supplies inventory (2016:
no impairment). In addition we have recorded an impairment charge of US$12
million for the Nyanzaga Project to reflect the impact of the new Mining Laws
on the carrying value of the project, which now stands at US$34 million. On a
gross basis, and before taking into account the impact of a reduced asset base
on deferred tax liabilities, the total impairment charge amounted to US$850
million.
Other charges
Other charges in 2017 amounted to US$90.4 million, compared to an income of
US$11.6 million in 2016. The main contributors include Bulyanhulu non
sustaining costs (US$13.9 million), Bulyanhulu stock obsolescence (US$7.5
million) and Bulyanhulu contractor exit and demobilisation cost (US$4.9
million). Retrenchment costs of US$25.1 million mainly relating to Bulyanhulu
reduced operations (US$16.9 million), discounting of indirect taxes US$13.3
million, legal costs of US$14.4 million mainly relating to the concentrate
export ban and other matters, once-off legal settlements of US$5.0 million
relating to the MDM settlement, foreign exchange losses of US$2.7 million and
project development costs of US$1.5 million. The charges were partly offset by
income of US$1.8 million generated through the sale of a mineral royalty
previously held by Acacia and the Houndé royalty income received of US$1.6
million.
All costs not classified as ongoing operating costs were allocated to the new
cost category called 'reduced operations costs' (ROP) and will be included in
other charges, and do not form part of AISC for Bulyanhulu or the group (US$
24.8 million). The costs reallocated to reduced operations include all UG
mining costs and processing costs as well as site overheads such as shift
transportation, health and safety and environmental costs, camp cost and
security costs were systematically reallocated based on headcounts.
Finance expense and income
Finance expense of US$12.4 million for 2017 was 12% higher than 2016 (US$11.0
million). The key components were borrowing costs relating to the Bulyanhulu
CIL facility (US$2.9 million) which were lower than the prior year due to a
lower outstanding facility following repayments, higher accretion expenses of
US$3.4 million relating to the discounting of the environmental reclamation
liability, US$2.3 million relating to the servicing of the US$150 million
undrawn revolving credit facility and the US$2.1 million premium paid on gold
put options. Other costs include bank charges and interest on finance leases
US$0.2 million.
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 credit of US$2.3 million is lower than the prior year tax
expense of US$147.1 million. The current year tax credit comprised of deferred
tax credits of US$209.9 million (2016: US$55.9 million) driven primarily by the
tax impact of the impairment charge (US$205.9 million) which reflects movements
in temporary differences, partly offset by current tax charges of US$207.7
million (2016: US$91.2 million) predominantly made up of the additional tax
provisions raised of US$172 million for uncertain tax positions for the
operating companies based on estimates of the impact of a comprehensive
settlement reflecting the key terms of the Framework announcements by Barrick
and the GoT and current year income tax for North Mara of US$35.7 million
driven by year to date profitability. This brings total provisions for Acacia's
uncertain tax positions to US$300 million. The tax expense for 2016 of US$147.1
million included US$69.9 million relating to uncertain tax positions raised for
historical tax disputes. The effective tax rate in 2017 amounted to 0.4%
compared to 61% in 2016, as a result of the above.
During 2017, we made provisional corporate tax payments of US$34.6 million
relating to North Mara, as well as a US$3.3 million final corporate tax payment
relating to 2016 final tax assessments. These provisional and final corporate
tax payments have been offset against the indirect tax receivable covered under
the Memorandum of Settlement entered into with the Tanzanian Government in
2011, and as a result, were not paid in cash. In addition, during 2017 we have
also made a corporate tax deposit payment of US$9.5 million relating to an
advance payment relating to a dispute raised on claimed historical North Mara
taxes, which was paid in cash.
Net earnings and earnings per share
As a result of the factors discussed above, the net loss for 2017 was US$707.4
million, against the prior year earnings of US$94.9 million.
The loss per share for 2017 amounted to US172.5 cents, a decrease of US195.7
cents from the prior year earnings per share of US23.2 cents. The decrease was
driven by the lower earnings, with no change in the underlying issued shares.
Adjusted net earnings and adjusted earnings per share
Adjusted net earnings were US$146.2 million compared to US$161.0 million in
2016. Net earnings in the period as described above have been adjusted for the
impact of items such as impairment charges, prior year tax provisions,
discounting of indirect tax receivables, restructuring costs, insurance
proceeds, legal settlements as well as Bulyanhulu reduced operations cost.
Refer to page 36 for reconciliation between net profit and adjusted net
earnings.
Adjusted earnings per share for 2017 amounted to US35.7 cents, a decrease of
US3.5 cents from 2016 adjusted earnings per share of US39.2 cents.
Financial position
Acacia had cash and cash equivalents on hand of US$80.5 million as at 31
December 2017 (US$317.8 million as at 31 December 2016). The Group's cash and
cash equivalents are with counterparties whom the Group considers to have an
appropriate credit rating. Location of credit risk is determined by physical
location of the bank branch or counterparty. Investments are held mainly in
United States dollars, with cash and cash equivalents in other foreign
currencies maintained for operational requirements.
During 2013, a US$142 million facility ("Facility") was put in place to fund
the bulk of the costs of the construction of the Bulyanhulu tailings
retreatment project ("Project"). The Facility is collateralised by the Project,
and has a term of seven years with a spread over Libor of 250 basis points. The
seven year Facility is repayable in equal instalments (bi-annual) over the term
of the Facility, after a two year repayment holiday period. The interest rate
has been fixed at 3.6% through the use of an interest rate swap. The full
facility of US$142 million was drawn in 2013. During 2017, the 4th and 5th
repayment amounting to US$28.4 million in total was made. At 31 December 2017,
the outstanding capital balance is US$71.0 million (31 December 2016 US$99.4
million).
As at 31 December 2017 (and to date), the existing revolving credit facility of
US$150 million, which runs until November 2019, remained undrawn.
The net book value of property, plant and equipment decreased from US$1.44
billion as at 31 December 2016 to US$0.77 billion as at 31 December 2017 as a
result of an impairment charge booked in 2017 of US$686.4 million. The main
capital expenditure drivers have been explained above, and have been offset by
depreciation charges of US$126.0 million. Refer to note 13 to the condensed
financial information for further details.
The current portion of inventories increased from US$184.3 million as at 31
December 2017 to US$291.9 million as at 31 December 2017. This was due to an
increase of US$124.7 million in finished goods, mainly relating to gold in
concentrate. Total gold ounces on hand of 192,290 ounces as at 31 December 2017
comprised 185,772 ounces of gold in unsold concentrate and 6,518 ounces of gold
in doré.
Total indirect tax receivables increased from US$136.4 million as at 31
December 2016 to US$170.7 million as at 31 December 2017. The increase was
mainly due to a build-up in VAT receivable as no VAT refunds were received
during 2017, with all submitted VAT returns still the subject of ongoing audits
by the Tanzanian Revenue Authority. Our gross increase in receivables, before
the corporate tax prepayment offset, amounted to approximately US$89.5 million.
This was partly offset by provisional and final corporate tax payments of
US$37.9 million, discounting of indirect taxes of US$13.3 million and
revaluation losses with the net increase in receivables being US$47.6 million.
The net deferred tax position was a liability of US$140.0 million as at 31
December 2016 compared to the asset of US$70.0 million as at 31 December 2017.
This was mainly as a result of the US$205.9 million tax effect of the
impairment charges.
Net assets decreased from US$1.86 billion as at 31 December 2016 to US$1.12
billion as at 31 December 2017. The decrease reflects the current year loss of
US$707.4 million and the payment of the final 2016 dividend of US$34.4 million.
Cash flow generation and capital management
Cash flow
(US$000) Three months ended 31 December Year ended 31
December
(Unaudited) 2017 2016 2017 2016
Cash (used in)/ generated from (1,503) 60,933 (22,972) 317,976
operating activities
Cash used in investing activities (13,411) (45,107) (151,711) (185,163)
Cash used in financing activities - - (62,785) (48,032)
(Decrease)/ increase in cash (14,914) 15,826 (237,468) 84,781
Foreign exchange difference on 106 (96) 190 (258)
cash
Opening cash balance 95,321 302,061 317,791 233,268
Closing cash balance 80,513 317,791 80,513 317,791
Cash flow from operating activities was an outflow of US$23.0 million for 2017,
a decrease of US$340.9 million from 2016 (US$318.0 million inflow). The
decrease relates to unfavourable working capital outflows of US$313.0 million
compared to unfavourable outflows of US$58.5 million in 2016 combined with the
impact of the inability to export our concentrate on operating cash flow of
approximately US$233.0 million.
The working capital outflow relates to a net increase in total inventories on
hand of US$172.2 million driven by the inability to export concentrate, a gross
increase in indirect tax receivables of approximately US$51.7 million,
provisional corporate tax paid of US$34.6 million relating to North Mara and a
final corporate tax payment relating to North Mara's 2016 assessed income tax
of US$3.3 million. These provisional and final corporate tax payments have been
offset against the indirect tax receivable covered under the Memorandum of
Settlement entered into with the Tanzanian Government in 2011. Other items
included in the working capital outflows included a corporate tax deposit
relating to North Mara of US$9.5 million.
Cash flow used in investing activities was US$151.7 million for 2017, a
decrease of 18% when compared to 2016 (US$185.2 million), driven by lower
capitalised development at both North Mara and Bulyanhulu and lower sustaining
capital expenditure at Bulyanhulu and North Mara.
A breakdown of total capital and other investing capital activities for 2017 is
provided below:
(US$'000) Year ended 31 December
(Unaudited) 2017 2016
Sustaining capital (45,226) (51,291)
Capitalised development (100,609) (138,691)
Expansionary capital (11,573) (3,660)
Total cash capital (157,408) (193,643)
Non-current asset movement1 5,697 8,480
Cash used in investing activities (151,711) (185,163)
Capital expenditure reconciliation:
Total cash capital 157,408 193,643
Land purchases 1,637 4,759
Movement in capital accruals (9,669 ) (2,504)
Capital expenditure 149,376 195,898
Land purchases classified as long term (1,637) (4,759)
prepayments
Non-cash rehabilitation asset (9,087) 21,955
adjustment
Total capital expenditure per segment 138,652 213,094
note
1 Non-current asset movements relates to the movement in Tanzania government
receivables, other long term assets and the sale of a mineral royalty.
Sustaining capital
Sustaining capital expenditure includes investment in fixed equipment and
mining infrastructure at Bulyanhulu (US$9.0 million) and at North Mara (US$13.7
million), investment in mobile equipment and component change-outs at both
North Mara and Bulyanhulu (US$8.1 million) In addition; US$1.6 million was
spent on land acquisitions primarily around the Nyabirama open pit. During the
year, capital accruals from December 2016 of US$10.0 million were paid.
Capitalised development
Capitalised development includes Bulyanhulu capitalised underground development
costs (US$58.8 million), North Mara capitalised stripping costs (US$45.4
million) and capitalised underground development (US$15.7 million).
Expansionary capital
Expansionary capital expenditure consisted mainly of capitalised expansion
drilling at North Mara of US$10.3 million mainly relating to drilling performed
as part of Gokona resource and reserve development (US$6.7 million) as well as
initial works on Nyabirama underground studies (US$3.1 million) and US$1.2
million relating to the Bulyanhulu optimisation study.
Non-cash capital
Non-cash capital was a negative US$9.1 million and consisted mainly of a
decrease in capital accruals (US$9.0 million) due to the cancellation of open
capital orders as part of transitioning Bulyanhulu to reduced operations and
reclamation asset adjustments (US$9.1 million). The reclamation adjustments
were driven by an update in estimate around closure related retrenchment costs,
and a reduction in the US risk free rates which drove a change in discount
rates.
Cash flow used in financing activities for 2017 of US$62.8 million, an increase
of US$14.8 million from US$48.0 million in 2016. The outflow relates to payment
of the final 2016 dividend of US$34.4 million and the payment of the 4th and
5th instalment of the borrowings related to the Bulyanhulu CIL facility
totalling US$28.4 million.
Dividend
Given the negative cash generation through 2017, and in line with our dividend
policy, no final dividend has been declared.
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;
* Determination of fair value of share options and cash-settled share-based
payments;
* Judgements around the prospect, timing and final terms of any comprehensive
negotiated settlement that the Company might be able to agree with the
Government of Tanzania, including by reference to the key terms of the
Framework announcements made in October 2017 by Barrick and the GoT and
including judgements around the timing and quantum of any cash outflows
that might be made in respect of historical tax matters; and
* Judgements around the timing of Bulyanhulu's restart and production ramp
up.
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$000) Three months ended 31 Year ended 31
December December
(Unaudited) 2017 2016 2017 2016
Gold revenue 188,607 253,957 744,294 1,014,468
Realised gold hedge gains (losses) 2,693 (487) 2,693 (1,818)
Net gold revenue 191,300 253,470 746,987 1,012,651
Gold sold (ounces) 147,636 209,292 592,861 816,743
Net average realised gold price 1,296 1,211 1,260 1,240
(US$/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$'000) December December
(Unaudited) 2017 2016 2017 2016
Total cost of sales 108,942 196,314 458,447 727,080
Deduct: depreciation and (25,260) (43,718) (106,201) (163,796)
amortisation*
Deduct: realised losses on 2,693 (487) 2,693 (1,818)
gold hedges
Deduct: Co-product revenue (642) (9,932) (7,221) (39,063)
Total cash cost 85,733 142,177 347,718 522,403
Total ounces sold 147,636 209,292 592,861 816,743
Total cash cost per ounce 581 679 587 640
sold
* Depreciation and amortisation includes the depreciation component of the cost
of inventory sold
All-in sustaining cost (AISC) is a non-IFRS financial measure. The measure is
in accordance with the World Gold Council's guidance issued in June 2013. It is
calculated by taking cash cost per ounce sold and adding corporate
administration costs, share-based payments, reclamation and remediation costs
for operating mines, corporate social responsibility expenses, mine exploration
and study costs, realised gains and/or losses on operating hedges, capitalised
stripping and underground development costs and sustaining capital expenditure.
This is then divided by the total ounces sold. A reconciliation between cash
cost per ounce sold and AISC for the key business segments is presented below:
(Unaudited) Three months ended 31 December 2017
(US$/oz sold) Bulyanhulu1 North Buzwagi Group*
Mara
Cash cost per - 587 535 581
ounce sold
Corporate - 29 21 52
administration
Share based - - 1 1
payments
Rehabilitation - 12 3 9
CSR expenses - 15 8 16
Capitalised - 186 - 93
development
Sustaining - 74 15 27
capital
Total AISC - 903 583 779
(Unaudited) Three months ended 31 December 2016
(US$/oz sold) Bulyanhulu North Buzwagi Group*
Mara
Cash cost per 784 436 1,035 679
ounce sold
Corporate 17 17 25 30
administration
Share based (21) (14) (20) (47)
payments
Rehabilitation 8 9 2 7
CSR expenses 7 19 7 15
Capitalised 214 236 - 181
development
Sustaining 52 147 7 87
capital
Total AISC 1,061 850 1,056 952
1 Cash cost per ounce sold and AISC per ounce sold for the quarter are
non-meaningful due to the impact of negligible sales ounces on the costs
relating to reprocessed tailings.
* The group total includes a credit of US$25/oz of unallocated corporate
related costs in Q4 2017, and a cost of US$14/oz in Q4 2016.
(Unaudited) Year ended 31 December 2017
(US$/oz sold) Bulyanhulu North Buzwagi Group*
Mara
Cash cost per 840 498 594 587
ounce sold
Corporate 59 26 35 45
administration
Share based (6) (2) (2) (14)
payments
Rehabilitation 20 11 5 11
CSR expenses 10 11 8 14
Capitalised 367 188 - 170
development
Sustaining 83 71 27 62
capital
Total AISC 1,373 803 667 875
(Unaudited) Year ended 31 December 2016
(US$/oz sold) Bulyanhulu North Buzwagi Group*
Mara
Cash cost per 722 410 1,031 640
ounce sold
Corporate 21 21 26 27
administration
Share based 2 2 3 37
payments
Rehabilitation 7 9 3 7
CSR expenses 6 15 10 13
Capitalised 226 201 - 170
development
Sustaining 74 75 22 64
capital
Total AISC 1,058 733 1,095 958
* The group total includes a credit of US$5/oz of unallocated corporate related
costs in 2017, and a cost of US$43/oz in 2016.
AISC is intended to provide additional information on the total sustaining cost
for each ounce sold, taking into account expenditure incurred in addition to
direct mining costs and selling costs.
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, co-product credits,
and production taxes, and exclude capitalised production stripping costs,
inventory purchase accounting adjustments, unrealised gains/losses from
non-hedge currency and commodity contracts, depreciation and amortisation and
corporate social responsibility charges. Cash cost is calculated net of
co-product revenue. Cash cost per tonne milled is calculated by dividing the
aggregate of these costs by total tonnes milled.
EBITDA is a non-IFRS financial measure. Acacia calculates EBITDA as net profit
or loss for the period excluding:
* 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) 2017 2016 2017 2016
Net (loss)/profit for the period (785,975) 48,285 (707,394) 94,944
Plus income tax (credit)/expense (47,835) 11,399 (2,272) 147,113
Plus depreciation and amortisation 25,260 43,718 106,201 163,796
Plus: impairment charges1 850,182 - 850,182 -
Plus finance expense 3,971 2,644 12,407 11,047
Less finance income (140) (365) (1,944) (1,512)
EBITDA 45,463 105,681 257,180 415,388
1 Refer note 7 in the financial statements
*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) 2017 2016 2017 2016
Net (loss)/earnings (785,975) 48,285 (707,394) 94,944
Adjusted for:
Restructuring cost (a)2 4,874 3,995 23,577 7,689
Discounting of indirect taxes (b) 13,276 (3,211) 13,276 (9,719)
One-off legal settlements (c) - - 5,083 -
Prior year tax positions - - - 69,916
recognised1
Reduced operational cost(d)3 4,000 - 11,411 -
Insurance settlements (e) - (3,455) - (3,455)
Impairment charges/write-offs (f)4 850,182 - 850,182 -
Provision for uncertain tax 172,000 - 172,000 -
positions(g)1
Tax impact of the above (212,558) 801 (221,917) 1,646
Adjusted net earnings 45,799 46,415 146,218 161,021
1 Includes a tax provision raised of US$172.0 million for uncertain tax
positions, based on an estimate of the impact of a comprehensive settlement
reflecting the key terms of the Framework announcements made by Barrick and the
GoT in October 2017. For the 12 months 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.
2 Restructuring costs mainly relate to Bulyanhulu (US$16.9 million) as a result
of the transitioning to reduced operations and other sites (US$8.2 million).
3 Reduced operations costs not part of Bulyanhulu's AISC cost and includes
stock obsolescence costs for 2017 (US$6 million) and contractor exit costs
(US$4.9 million).
4 Refer note 7 in the financial statements
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 2017 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 the challenges in our operating environment in Tanzania,
particularly as a result of ongoing disputes with the Government of Tanzania,
and developments or trends affecting the wider global economy and/or the mining
industry. As a result of the review, at the end of 2017 we viewed our principal
risks as relating to the following:
* Political, legal and regulatory developments
* Single country risk
* Attraction and retention of employees
* Significant changes to commodity prices
* Operational security and theft
* Liquidity
* Significant fraud and corruption
* Reserve and resource estimates
* Environmental hazards and rehabilitation
* Safety risks relating to mining operations
Further details as regards our Principal Risks and Uncertainties and risk
assessments conducted in respect thereof will be provided as part of the 2017
Annual Report and Accounts.
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 2017 2016
Revenue 5 751,515 1,053,532
Cost of sales (458,447) (727,080)
Gross profit 293,068 326,452
Corporate administration (26,913) (21,895)
Share-based payments 8,236 (29,929)
Exploration and evaluation costs 6 (24,829) (24,020)
Corporate social responsibility expenses (8,213) (10,665)
Impairment charges 7 (850,182) -
Other (charges)/income 8 (90,370) 11,649
(Loss)/Profit before net finance expense and (699,203) 251,592
taxation
Finance income 9 1,944 1,512
Finance expense 9 (12,407) (11,047)
(Loss)/Profit before taxation (709,666) 242,057
Tax credit/(expense) 10 2,272 (147,113)
Net (loss)/profit for the year (707,394) 94,944
(Loss)/Earnings per share:
Basic (loss)/earnings per share (cents) 11 (172.5) 23.2
Diluted (loss)/earnings per share (cents) 11 (172.5) 23.1
The notes on pages 43 to 63 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) 2017 2016
Net (loss)/profit for the year (707,394) 94,944
Other comprehensive income:
Items that may be subsequently reclassified to
profit or loss:
Changes in fair value of cash flow hedges 108 7
Total comprehensive (expense)/income for the year (707,286) 94,951
The notes on pages 43 to 63 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 2017 2016
ASSETS
Non-current assets
Goodwill and intangible assets 82,383 216,190
Property, plant and equipment 13 770,574 1,443,176
Deferred tax assets 14 169,513 8,431
Non-current portion of inventory 15 133,550 98,936
Derivative financial instruments 16 907 821
Other assets 17 180,708 63,297
1,337,635 1,830,851
Current assets
Inventories 15 291,880 184,313
Trade and other receivables 18 18,085 18,830
Derivative financial instruments 16 2,619 1,343
Other current assets 18 70,155 149,518
Cash and cash equivalents 80,513 317,791
463,252 671,795
Total assets 1,800,887 2,502,646
EQUITY AND LIABILITIES
Share capital and share premium 929,199 929,199
Other reserves 191,793 933,696
Total equity 1,120,992 1,862,895
Non-current liabilities
Borrowings 19 42,600 71,000
Deferred tax liabilities 14 99,533 148,390
Derivative financial instruments 16 - 30
Provisions 20 127,028 145,722
Other non-current liabilities 5,038 15,699
274,199 380,841
Current liabilities
Trade and other payables 20 350,450 222,543
Borrowings 19 28,400 28,400
Derivative financial instruments 16 481 584
Provisions 21 24,650 7,235
Other current liabilities 1,715 148
405,696 258,910
Total liabilities 679,895 639,751
Total equity and liabilities 1,800,887 2,502,646
The notes on pages 43 to 63 are an integral part of this financial information.
Consolidated statement of changes in equity
(Unaudited) Share Share Contributed Cash
capital premium surplus/ flow
Other hedging
reserve reserve
(in thousands of United States dollars)
Balance at 1 January 2016 (Audited) 62,097 867,102 1,368,713 552
Profit for the year - - - -
Other comprehensive income - - - 7
Share option grants - - - -
Transactions with non-controlling interest holders - - - -
Dividends to equity holders of the Company - - - -
Balance at 31 December 2016 (Audited) 62,097 867,102 1,368,713 559
Loss for the year - - - -
Other comprehensive income - - - 108
Share option grants - - - -
Transactions with non-controlling interest holders - - - -
Dividends to equity holders of the Company - - - -
Balance at 31 December 2017 (Unaudited) 62,097 867,102 1,368,713 667
(Unaudited) Stock Accumulated Total
option losses equity
reserve
(in thousands of United States dollars)
Balance at 1 January 2016 (Audited) 3,876 (514,841) 1,787,499
Profit for the year - 94,944 94,944
Other comprehensive income - - 7
Share option grants 77 - 77
Transactions with non-controlling interest holders - - -
Dividends to equity holders of the Company - (19,632) (19,632)
Balance at 31 December 2016 (Audited) 3,953 (439,529) 1,862,895
Loss for the year - (707,394) (707,394)
Other comprehensive income - - 108
Share option grants (232) - (232)
Transactions with non-controlling interest holders - - -
Dividends to equity holders of the Company - (34,385) (34,385)
Balance at 31 December 2017 (Unaudited) 3,721 (1,181,308) 1,120,992
The notes on pages 43 to 63 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 2017 2016
Cash flows from operating activities
Net (loss)/profit for the year (707,394) 94,944
Adjustments for:
Tax (credit)/expense (2,272) 147,113
Depreciation and amortisation 125,968 156,301
Finance items 10,463 9,535
Impairment charges 850,182 -
Loss/(Profit) on disposal of property, plant 123 (289)
and equipment
Sale of mineral royalty (1,753) -
Cash settlement of share options (259) -
Working capital movements 12 (313,091) (58,497)
Other non-cash items 12 22,160 (23,850)
Cash (used in)/generated from operations before (15,873) 325,257
interest and tax
Finance income 1,944 1,512
Finance expenses (9,043) (8,793)
Cash (used in)/generated by operating activities (22,972) 317,976
Cash flows from investing activities
Purchase of property, plant and equipment (157,408) (193,643)
Movement in other assets 6,856 6,952
Acquired mineral interest - (5,000)
Proceeds from sale of mineral royalty 1,753 -
Other investing activities 12 (2,912) 6,528
Cash used in investing activities (151,711) (185,163)
Cash flows from financing activities
Loans paid (28,400) (28,400)
Dividends paid (34,385) (19,632)
Net cash used in financing activities (62,785) (48,032)
Net (decrease)/increase in cash and cash (237,468) 84,781
equivalents
Net foreign exchange difference 190 (258)
Cash and cash equivalents at 1 January 317,791 233,268
Cash and cash equivalents at year end 80,513 317,791
The notes on pages 43 to 63 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
2017 was approved for issue by the Board of Directors of the Company on 11
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.
1. 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 2017, 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 2017. 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.
In assessing the Acacia Group's going concern status the Directors have taken
into account the impact of the concentrate export ban on ongoing operations as
well as the following factors and assumptions: the current cash position; the
latest mine plans, the short term gold price, and Acacia Group's capital
expenditure and financing plans. In addition, the Directors have considered a
range of scenarios around the various potential outcomes for the resolution of
the current operating challenges in Tanzania in the circumstances, including
the cash flow impact of an extended concentrate export ban; and the potential
impacts of the timing and final terms of any comprehensive settlement which
might be approved by the Company which reflect key terms of the Framework
announcements made by Barrick and the GoT in October 2017, including the
lifting of the concentrate export ban and staged payments of US$300 million
relating to historical tax matters. In addition the Directors have assumed that
the Group will not be required to settle its current outstanding borrowing
obligations and will repay these in accordance with the current terms of the
relevant agreements. After making appropriate enquiries and considering the
uncertainties described above, the Directors consider that it is appropriate to
adopt the going concern basis in preparing the condensed consolidated financial
information however have concluded that the combination of the above
circumstances represents a material uncertainty that may cast significant doubt
on the Group's ability to continue as a going concern. The condensed
consolidated financial information does not include any adjustments that would
result if the Group was unable to continue as a going concern should the
assumptions referred to above prove not to be correct.
The auditors have indicated that they are likely to issue an emphasis of matter
within their audit opinion included within the Annual Report, drawing attention
to the material uncertainties related to the impact of the concentrate export
ban and ongoing discussions between Barrick and the GoT on the group's
company's assets, liabilities and cash flows, and to include a separate section
within their audit opinion under the heading "Material uncertainty related to
going concern" detailing the matters outlined above.
1. 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 2017:
* 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 did
not have a significant impact on the Group financial statements.
* 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 did not have a significant impact
on the Group financial statements.
a. 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 2017:
* Amendment to IFRS 9 -'Financial instruments'. IFRS 9 replaces the multiple
classification and measurement models in IAS 39 Financial instruments:
Recognition and measurement with a single model that has initially only two
classification categories: amortised cost and fair value. 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 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'. IFRS 16 will affect primarily the
accounting by lessees and will result in the recognition of almost all
leases on balance sheet. The standard removes the current distinction
between operating and financing leases and requires recognition of an asset
(the right to use the leased item) and a financial liability to pay rentals
for virtually all lease contracts. Effective 1 January 2019. Management is
currently evaluating the impact of new standard in order to put all
frameworks and systems in place. Based on initial investigation, the
standard is not expected to have a significant impact on the Group, due to
majority of our existing contracts either relate to service agreements or
the performance obligations based on variable terms and thus not resulting
in a right of use asset.
* Amendments to IFRS2, 'Classification and Measurement of Share-based Payment
Transactions'. The amendments made to AASB 2 in July 2016 clarify the
measurement basis for cash-settled share-based payments and the accounting
for modifications that change an award from cash-settled to equity-settled.
Effective 1 January 2018. The standard is not expected to have a
significant impact on the Group.
* 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. 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.
1. 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 2017 and 31 December 2016 is set out below.
For the year ended 31 December 2017
(Unaudited) North Mara Bulyanhulu Buzwagi Other Total
(in thousands of United States
dollars)
Gold revenue 406,917 134,110 203,267 - 744,294
Co-product revenue 1,296 2,937 2,988 - 7,221
Total segment revenue 408,213 137,047 206,255 - 751,515
Segment cash operating cost1 (163,001) (93,521) (98,417) - (354,939)
Realised gains on gold hedges 1,294 - 1,399 - 2,693
Corporate administration (8,313) (6,314) (5,694) (6,592) (26,913)
Share-based payments 511 593 349 6,783 8,236
Exploration and evaluation - (571) - (24,258) (24,829)
costs
Other charges and corporate (13,243) (52,916) (13,605) (18,819) (98,583)
social responsibility expenses
EBITDA2 225,461 (15,682) 90,287 (42,886) 257,180
Impairment charges - (837,921) - (12,261) (850,182)
Depreciation and amortisation4 (54,826) (46,531) (4,288) (556) (106,201)
EBIT2 170,635 (900,134) 85,999 (55,703) (699,203)
Finance income 1,944
Finance expense (12,407)
Loss before taxation (709,666)
Tax credit/(expense) 2,272
Net loss for the year (707,394)
Capital expenditure:
Sustaining 20,927 9,033 4,338 1,259 35,557
Expansionary 10,270 1,190 - 113 11,573
Capitalised development 61,066 39,543 - - 100,609
92,263 49,766 4,338 1,372 147,739
Non-cash capital expenditure adjustments
Reclamation asset addition (2,951) (4,158) (1,978) - (9,087)
Total capital expenditure 89,312 45,608 2,360 1,372 138,652
Segmental cash operating cost 163,001 93,521 98,417 354,939
Deduct: co-product revenue (1,296) (2,937) (2,988) (7,221)
Total cash costs 161,705 90,584 95,429 347,718
Sold ounces 324,455 107,855 160,552 592,861
Cash cost per ounce sold2 498 840 594 587
Corporate administration 26 59 35 45
charges
Share based payments (2) (6) (2) (14)
Rehabilitation - accretion and 11 20 5 11
depreciation
Corporate social responsibility 11 10 8 14
expenses
Capitalised stripping/ UG 188 367 - 170
development
Sustaining capital expenditure 71 83 27 62
All-in sustaining cost per 803 1,373 667 875
ounce sold2
Segment carrying value3 249,170 600,359 194,385 82,864 1,126,778
For the year ended 31 December 2016
(Audited) 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 year 94,944
Capital expenditure:
Sustaining 23,558 20,231 3,582 1,416 48,787
Expansionary 2,399 1,262 - - 3,661
Capitalised development 75,609 63,082 - - 138,691
101,566 84,575 3,582 1,416 191,139
Non-cash capital expenditure adjustments
Reclamation asset 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
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 33 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
1. Revenue
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016
Gold doré sales 720,755 739,317
Gold concentrate sales¹ 23,539 275,152
Copper concentrate sales¹ 4,001 32,658
Silver sales 3,220 6,405
Total 751,515 1,053,532
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$3.6 million for the
year ended 31 December 2017 (US$7.0 million for the year ended 31 December
2016).
(in thousands of United States dollars) For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
Revenue by Location of Customer2 2017 2016
Europe
Switzerland 140,691 488,383
Germany 11,615 58,747
Asia
India 582,943 253,881
China 437 176,143
Japan 15,829 76,378
Total revenue 751,515 1,053,532
1. 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 2017 are sales to six major
customers. Revenues of approximately US$739 million (2016: US$913 million)
arose from sales to four of the Group's largest customers.
1. 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) 2017 2016
Expensed during the year:
North Mara - 297
Bulyanhulu 571 3,532
Kenya 12,208 10,582
West Africa 11,119 7,544
Other1 931 2,065
Total expensed 24,829 24,020
Capitalised during the year:
North Mara 10,270 2,399
Total 35,099 26,419
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.
1. 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.
Acacia has identified triggers for impairment testing of the carrying value of
its assets, including but not limited to the challenges experienced in the
operating environment in Tanzania, the announcement of new legislation by the
GoT in respect of the natural resources sector and the resulting decision to
reduce operations at Bulyanhulu..
As a result, the Group has undertaken a carrying value assessment of its
affected cash generating units ("CGUs") and long life intangible assets. The
assessment compared the recoverable amount of CGU to the carrying value of the
CGUs 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 CGUs.
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.
For the purpose of carrying value assessments in accordance with applicable
accounting standards, Management has based its calculation of future cash flows
of the affected CGUs by reference to key terms of the Framework announcements
by Barrick and by the GoT in October 2017. Based on Barrick's announcements
and its discussions and exchanges with Acacia, it is Barrick's belief that it
will be able to agree with the GoT a detailed proposal for a comprehensive
settlement of the situation, and that this will be in a form that Barrick could
recommend to Acacia for review and approval. Key assumptions applied in these
calculations include a 50% economic share of future economic benefits for the
GoT in the form of taxes, royalties and a 16% free carry interest in the CGUs,
as well as a US$300 million payment in relation to historical tax claims paid
in instalments as concentrate sales recommence. In addition the Framework
announcements provided for Acacia to contribute certain monies to fund specific
projects in Tanzania. For the purposes of the carrying value assessments,
Acacia has assumed that concentrate sales will resume from 1 July 2018 and
Bulyanhulu will return to full operation towards the end of 2019, VAT refunds
will recommence and historic carried forward tax losses will continue to be
available to offset against future taxable profits. Barrick has previously
announced that it is targeting H1 2018 for agreement of the detailed terms and
documentation for a comprehensive settlement reflecting the key terms of the
Framework announcements.
Acacia continues to provide support to Barrick in its discussions with the GoT,
Acacia has not yet received for review and approval a detailed proposal that
has been agreed between Barrick and the GoT, and no conclusions can be made by
Acacia as to whether any particular terms of settlement would be approved by
Acacia. In the meantime, Acacia continues to reserve its rights included under
our mine development agreements, the disputes between Acacia and the GoT have
not yet been resolved, and PML and BGML remain in international arbitration
with the GoT. Acacia continues to prefer a negotiated resolution, but believes
that there remain a range of potential outcomes to the current situation.
Acacia considers that, in conducting the review of carrying values in
accordance with applicable accounting standards as at 31 December 2017, the
discount rate should be increased to (a) reflect the uncertainty around the
final terms of any comprehensive settlement that might be agreed or whether
settlement will be reached at all, and (b) to best reflect the potential
reduction in value as a result of the proposed 16% free carry interest for the
GoT which cannot otherwise be included in calculations of value at a CGU level
conducted on a 100% basis. Therefore, for the purposes of the carrying value
review of the affected CGUs, we have used a discount rate of 11% compared to
Acacia's updated calculated weighted average cost of capital of 6.5% (2016:5%).
The key economic assumptions used in the reviews during 2017 and 2016 were:
For the year ended For the year ended
31 December 31 December
2017 2016
Gold price per ounce US$1,200 US$1,200
Copper price per pound US$2.75 US$2.25
British Pound (US$:GBP) 0.76 0.74
Tanzanian Shilling (US$:TZS) 2,250 2,150
Long-term oil price per barrel US$60 US$60
WACC 6.5% 5%
Discount rate used in carrying value 11% 5%
review
NPV multiples 1 1
The carrying value assessment demonstrates a reduction in value at all three
CGUs, however, based on these assumptions Buzwagi and North Mara have headroom
above their current carrying values. At Bulyanhulu, the impact of the changes
was greater, due to the long life of the mine and the delay to a return to
positive cash generation due to the move to reduced operations. Acacia has
recorded a net impairment of US$632.0 million for Bulyanhulu, which includes a
pre-tax write-down of US$122 million for goodwill. In addition we have recorded
an impairment charge of US$12.3 million for the Nyanzaga Project to reflect the
impact of the new mining laws on the carrying value of the project, which now
stands at US$34 million.
The adjusted carrying value for the Group is now approximately US$1.1 billion,
made up of US$0.6 billion for Bulyanhulu, US$0.2 billion for North Mara, US$0.2
billion for Buzwagi and US$0.1 billion for exploration and other.
The impairment charges recognised in the income statement for the year ended 31
December comprise the following:
For the year ended For the year ended
31 December 31 December
(in thousands of United States 2017 2016
dollars)
Bulyanhulu 837,921 -
Nyanzaga exploration property1 12,261 -
Gross impairment charge 850,182 -
Comprising:
Impairment of goodwill 121,546
Impairment of property, plant and 686,375 -
equipment
Impairment of supplies inventory 30,000 -
Impairment of intangible assets 12,261 -
Gross impairment charge, before tax 850,182 -
Deferred income tax (205,912) -
Total impairment charge 644,270 -
1 The Nyanzaga exploration property is located in Tanzania. Acquired mineral
interests /exploration and evaluation assets are classified as intangible
assets and have indefinite useful lives.
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, discount rates and the timing of the
resolution of the export ban. 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%, and a delay of resolution by 12 months.
Under these scenarios, a reasonably possible decrease in the gold price
assumption of US$100 per ounce would result in an additional impairment charge,
net of tax, relating to Bulyanhulu of approximately US$172 million, while a
similar increase in gold price would result in a reduction in the impairment
charge of similar value. In addition, given limited headroom, a similar
decrease would result in an impairment charge of US$43m at Buzwagi, whilst at
North Mara headroom would be maintained.
Under the assumptions as set out above, a further delay in the resolution of
the export ban will result in an additional impairment charge of US$56 million
for Bulyanhulu, while headroom is maintained for North Mara and Buzwagi.
A reasonably possible increase in discount rate of 1% would result in an
additional impairment relating to Bulyanhulu of US$63 million, with a
reasonably possible decrease in discount rate of 1% resulting in a reduction in
impairment charges of similar value. Buzwagi and North Mara will not be
affected.
A reasonably possible adverse change in any of the assumptions set out above
will result in an additional impairment relating to Nyanzaga.
Should a negotiated resolution of the current situation not eventuate, the
recoverable values of the identified CGUs may be further impacted, and these
will be reviewed at such time.
1. Other Charges/(Income)
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016
Other expenses
Restructuring costs 25,077 7,689
Discounting of indirect tax receivables 13,276 -
Bulyanhulu reduced operations costs1 24,804 -
Foreign exchange losses 2,710 -
Legal costs 14,421 2,641
One off legal settlement 5,083 -
Project development costs 1,485 1,123
Inventory write-downs 1,500 -
Other 5,573 4,583
Total 93,929 16,036
Other income
Bad debts recovered - (54)
Discounting of indirect tax receivables - (9,719)
Profit on disposal of property, plant and equipment - (289)
Unrealised non-hedge derivative gains (200) (13,031)
Foreign exchange gains - (1,137)
Insurance proceeds - (3,455)
Other (3,359) -
Total (3,559) (27,685)
Total other charges/(income) 90,370 (11,649)
1 Includes US$13.9 million of non-sustaining operating costs allocated,
US$4.9m of contract exit costs and US$6 million of inventory written down as a
result of moving to reduced operational state.
1. 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) 2017 2016
Interest on time deposits 1,841 1,236
Other 103 276
Total 1,944 1,512
b) Finance expense
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016
Unwinding of discount1 3,364 2,254
Revolving credit facility charges2 2,341 2,279
Interest on CIL facility 2,911 3,956
Premium on gold put options 2,113 -
Interest on finance leases 204 -
Bank charges 583 701
Other 891 1,857
Total 12,407 11,047
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.
1. Tax (Credit)/Expense
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016
Current tax:
Current tax on profits for the year 35,667 54,508
Adjustments in respect of prior years1 172,000 36,697
Total current tax 207,667 91,205
Deferred tax:
Origination and reversal of temporary differences2 (209,939) 55,908
Total deferred tax (209,939) 55,908
Income tax (credit)/expense (2,272) 147,113
1 Included in 2017 is a provision for uncertain tax positions of US$68.5
million relating to North Mara and US$103.5 million relating to Bulyanhulu, for
uncertain tax positions, based on an estimate of the impact of a comprehensive
settlement reflecting the key terms of the Framework announcements made by
Barrick and the GoT in October 2017. Included in 2016 is a provision for
uncertain tax positions of US$30.4 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 2016 is a provision for uncertain tax positions of US$35.0
million relating to Bulyanhulu following an adverse tax ruling, as reported in
Q1 2016.
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to the profits
of the consolidated entities as follows:
For the year For the year
ended ended
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016
(Loss)/ profit before tax (709,666) 242,057
Tax calculated at domestic tax rates applicable to profits in (209,074) 73,373
the respective countries
Tax effects of:
Difference in tax rates in different jurisdictions (3,826) (756)
Expenses not deductible for tax purposes3 49,142 247
Tax losses for which no deferred income tax asset was recognised 9,611 76,592
Utilisation of previously unrecognised tax losses (25,594) -
Increase in provision for uncertain tax positions4 172,000 -
Other permanent differences 5,469 (2,343)
Tax (credit)/charge (2,272) 147,113
3 Relates mainly to impairment charges relating to goodwill, intangibles and
supplies inventory not deductible for tax purposes. Refer note 7 for full
details
4 Included in 2017 is a provision for uncertain tax positions of US$68.5
million relating to North Mara and US$103.5 million relating to Bulyanhulu,
based on an estimate of the impact of a comprehensive settlement reflecting the
key terms of the Framework announcements made by Barrick and the GoT in October
2017.
In addition to the net impairment as set out in note 7, to meet applicable
accounting standards, Acacia has also raised an additional tax provision of
US$172 million relating to the estimated uncertain tax positions for its
operating companies. Management has based its calculation on an estimate of the
impact of a comprehensive settlement reflecting the key terms of the Framework
announcements made by Barrick and the GoT in October 2017, including in respect
of historical tax claims. This brings total provisions for Acacia's uncertain
tax positions to US$300 million. Acacia continues to reserve and protect all
its legal rights, as noted above and including through the arbitrations
commenced by BGML and PML, and no liability has been incurred by Acacia as a
result of the Framework announcements. The additional provision is required,
however, to meet applicable accounting standards requiring assessment of
current obligations for accounting purposes based on an assessment of relevant
cash outflows from the relevant operating companies in respect of uncertain tax
positions.
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.
1. (Loss)/Earnings Per Share (EPS)
Basic EPS is calculated by dividing the net (loss)/profit 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 2017 and 31 December 2016, 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) 2017 2016
(Loss)/Earnings
Net (loss)/profit from continuing operations attributable to (707,394) 94,944
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
Weighted average number of Ordinary Shares for diluted earnings 410,085,499 410,441,013
per share
(Loss)/Earnings per share
Basic (loss)/earnings per share (cents) (172.5) 23.2
Dilutive (loss)/earnings per share (cents) (172.5) 23.1
1. 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) 2017 2016
Indirect and corporate taxes1 (89,560) (59,100)
Increase in indirect tax receivable (51,703) (18,224)
Prepaid corporate tax - (20,000)
Income tax paid - Final (3,257) -
Income tax paid - Provisional (34,600) (20,876)
Other current assets2 (10,774) 695
Trade receivables 745 (4,472)
Inventories3 (172,180) (8,312)
Other liabilities4 (7,301) 33,582
Share based payments4 (1,780) (35,966)
Trade and other payables5 (31,170) 15,931
Other working capital items6 (1,071) (855)
Total (313,091) (58,497)
1 During the year, we have made US$34.6 million (2016: US$20.0 million)
corporate tax provisional payments as well as US$ 3.3 million final corporate
tax payments relating to North Mara's 2016 tax assessment. This has been funded
through an offset against current indirect taxes that was due for refund.
2 Other current assets include North Mara corporate tax deposits paid of US$9.5
million.
3 The inventory adjustment includes the movement in current as well as the
non-current portion of inventory.
4 The other liabilities adjustment mainly relate to the revaluation of future
shared based payments. During the year, share based payments of US$1.8 million
(2016: US$36.0 million) was made.
5 The trade and other payables adjustment exclude statutory liabilities in the
form of income tax payable.
6 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) 2017 2016
Adjustments for non-cash income statement items:
Foreign exchange losses/(gains) 2,900 (1,463)
Discounting of indirect tax receivables 13,276 (9,719)
Provisions added 7,550 -
Provisions settled - (8)
Movement in derivatives (1,495) (13,031)
Stock option expense 27 77
Other non-cash items 92 36
Exchange loss on revaluation of cash balances (190) 258
Total 22,160 (23,850)
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) 2017 2016
Proceeds on sale of property, plant and equipment - 6,713
Other long-term receivables 194 (10)
Rehabilitation expenditure (3,106) (175)
Total (2,912) 6,528
1. Property, Plant and Equipment
For the year ended 31 Plant and Mineral Assets under Total
December 2017 (Unaudited) equipment properties and construction¹
(in thousands of United mine development
States dollars) costs
At 1 January 2017, net of 553,993 842,019 47,164 1,443,176
accumulated depreciation
Additions - - 147,739 147,739
Non-cash reclamation asset (9,087) - - (9,087)
adjustment
Foreign currency translation 1,212 - - 1,212
adjustments
Disposals/write-downs (123) - - (123)
Impairment2 (274,608) (411,767) - (686,375)
Depreciation (71,984) (53,984) - (125,968)
Transfers between categories 46,165 109,791 (155,956) -
At 31 December 2017 245,568 486,059 38,947 770,574
At 1 January 2017
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
At 31 December 2017
Cost 1,943,643 1,887,068 38,947 3,869,658
Accumulated depreciation and (1,698,075) (1,401,009) - (3,099,084)
impairment
Net carrying amount 245,568 486,059 38,947 770,574
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 Impairment in 2017 relates to property plant and equipment at Bulyanhulu.
Refer to note 7 for further detail.
For the year ended 31 Plant and Mineral Assets under Total
December 2016 (Audited) 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 59,355 140,864 (200,219) -
At 31 December 2016 553,993 842,019 47,164 1,443,176
At 1 January 2016
Cost 1,845,234 1,636,413 56,244 3,537,891
Accumulated depreciation and (1,272,357) (874,821) - (2,147,178)
impairment
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.
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) 2017 2016
(Unaudited) (Audited)
Cost - capitalised finance 51,618 51,617
leases
Accumulated depreciation and (42,948) (40,925)
impairment
Net carrying amount 8,670 10,692
1. 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)
2017 2016
Tax losses 599,569 648,984
Total 599,569 648,984
The above tax losses, which translate into deferred tax assets of approximately
US$165 million (2016: US$184 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 2017 2016 2017 2016 2017 2016
dollars)
Property, plant and equipment - - 196,921 390,050 196,921 390,050
Provisions (8,293) (4,456) - - (8,293) (4,456)
Interest deferrals (59) (479) 542 - 483 (479)
Tusker acquisition - - 6,235 6,354 6,235 6,354
Tax loss carry-forwards (265,326) (251,510) - - (265,326) (251,510)
Net deferred tax (assets)/ (273,678) (256,445) 203,698 396,404 (69,980) 139,959
liabilities
Legal entities
Legal entities Assets Liabilities Net
(in thousands of United States 2017 2016 2017 2016 2017 2016
dollars)
North Mara Gold Mine Ltd - - 91,321 77,529 91,321 77,529
Bulyanhulu Gold Mine Ltd (160,600) - - 64,539 (160,600) 64,539
Pangea Minerals Ltd1 (8,258) (7,504) - - (8,258) (7,504)
Other (655) (927) 8,212 6,322 7,557 5,395
Net deferred tax (assets)/ (169,513) (8,431) 99,533 148,390 (69,980) 139,959
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$412 million (2016: US$411
million).
1. Inventories
As at As at
31 December 31 December
(in thousands of United States dollars) 2017 2016
Raw materials
Ore in stockpiles 22,253 8,269
Mine operating supplies1 117,946 143,610
Work in process 5,103 10,534
Finished products
Gold doré/bullion 7,078 8,692
Gold, copper and silver concentrate2 139,500 13,208
Total current portion of inventory 291,880 184,313
Non-current ore in stockpiles 133,550 98,936
Total 425,430 283,249
1 Mine operating supplies for 2017 includes the impairment of US$30.0 million
relating to Bulyanhulu, Refer to note 7 for further details.
2 Gold, copper and silver concentrate on hand relate to finished products at
Bulyanhulu (US$ 88.5 million) and Buzwagi (US$US$51.0 million) due to the
inability to export concentrate since March 2017.
1. 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
2017 and 31 December 2016.
Assets Liabilities
For the year ended 31 December 2017 Current Non-current Current Non-current Net fair
(in thousands of United States value
dollars)
Interest contracts: Designated as 531 667 481 - 717
cash flow hedges
Commodity contracts: Not designated 2,088 240 - - 2,328
as hedges
Total 2,619 907 481 - 3,045
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 33 255 73 - 215
cash flow hedges
Commodity contracts: Not designated 1,310 566 511 30 1,335
as hedges
Total 1,343 821 584 30 1,550
1. Other Assets
As at As at
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016
Amounts due from government1 11,629 11,748
Operating lease prepayments - TANESCO powerlines 374 809
Prepayments - Acquisition of rights over leasehold land2 35,948 42,250
Non-current portion of indirect tax receivable3 132,405 7,945
Village housing 151 254
Deferred finance charges 201 291
Total 180,708 63,297
1. Included in this amount are amounts receivable from the NSSF of US$6.7
million (2016: US$5.4 million) as well as amounts due from TANESCO of
US$1.0 million (2016: US$3.1 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 6.5% (2016: 5%).
This resulted in a discounting debit of US$13.3 million (2016: US$9.7
million credit) to the income statement (refer note 8).
1. Trade Receivables and Other Current Assets
As at As at
31 December 31 December
(Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016
Trade and other receivables:
Amounts due from doré and concentrate sales 18 7,841
Amounts due from realised gains on gold put options 1,356 -
Amounts due from royalty income 1,453 -
Other receivables¹ 16,156 12,023
Due from related parties 40 40
Less: Provision for doubtful debt on other receivables (938) (1,074)
Total 18,085 18,830
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) 2017 2016
Other current assets:
Current portion of indirect tax receivables² 38,285 128,423
Other receivables and advance payments³ 31,870 21,095
Total 70,155 149,518
2 The current portion of indirect tax receivables includes an amount of US$31.4
million relating to North Mara as it is expected that the current portion will
be recovered through offsets against corporate income tax, as agreed under the
MOS entered into in 2012, within the next year.
3 Other receivables and advance payments mainly relate to prepayments for
insurance US$9.4 million (2016: US$6.5 million), corporate tax deposit paid at
North Mara US$9.5 million and current amounts receivable from the NSSF of
US$4.8 million (2016: US$5.0 million).
1. Borrowings
During 2013, a US$142 million facility was put in place to fund the bulk of the
costs of the construction of one of Acacia's key growth projects, the
Bulyanhulu CIL Expansion project ("Project"). The Facility is collateralised by
the Project, has a term of seven years with a spread over Libor of 250 basis
points. In common with borrowing agreements of this nature the facility
includes various covenants as well as material adverse effect clauses. 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 2017 two payments of
US$14.2 million were paid. As at 31 December 2017 the balance owing was US$71.0
million (2016: US$99.4 million). Interest accrued to the value of US$0.5
million (2016: US$0.6 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 2017 was US$2.9 million (2016: US$4.0
million).
1. Trade and Other Payables
As at As at
31 December 31 December
(in thousands of United States dollars) 2017 2016
Trade payables 62,610 84,294
Income tax payable 11,442 13,632
Accrued expenses 40,958 54,344
Payroll-related payables 12,185 20,182
Contract retentions - -
Royalty payable 988 1,114
Provisions for uncertain tax positions1 206,912 34,912
Amounts due to related parties 15,355 14,065
Total 350,450 222,543
1 Included in the 2017 amount are provisions raised for uncertain tax positions
of US$68.5 million relating to North Mara and US$103.5 million relating to
Bulyanhulu, based on an estimate of the impact of a comprehensive settlement
reflecting the key terms of the Framework announcements made by Barrick and the
GoT in October 2017. Included in the amount for 2016 are accruals raised for
uncertain tax positions in order to address the direct impact of the ruling on
historic tax assessments and the potential impact this may have on the
applicability of certain deductions for prior years at North Mara and Tulawaka
(US$34.8 million).
1. Provisions
Rehabilitation¹ Other² Total
(in thousands of United 2017 2016 2017 2016 2017 2016
States dollars)
At 1 January 152,205 128,170 752 761 152,957 128,931
Change in estimate (9,087) 21,956 - - (9,087) 21,956
Utilised during the year (3,106) (175) - (9) (3,106) (184)
Unwinding of discount 3,364 2,254 - - 3,364 2,254
Additions - - 7,550 - 7,550
At 31 December 143,376 152,205 8,302 752 151,678 152,957
Current portion (16,348) (6,483) (8,302) (752) (24,650) (7,235)
Non-current portion 127,028 145,722 - - 127,028 145,722
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 2018 and 2041 and beyond, varying from
mine site to mine site. The change in estimate in the current year relates
mainly to deferrals in estimated cash flows resulting in a lower net present
value combined with slight changes in the US risk free rates driving 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 US$3.9 million (2016: US$0.7
million) as well as severance provisions mainly at Bulyanhulu as part of the
reduced operations and redundancies at Buzwagi due to mining activities coming
to an end (US$ 4.4 million).
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 2017, the Group has the
following commitments and/or contingencies.
a. Legal contingencies
As at 31 December 2017, the Group was a defendant in a number of lawsuits. The
plaintiffs are claiming damages and interest thereon in respect of claims due
to one or more of the following: unlawful eviction, termination of services and
/or, non-payment for services, defamation, negligence by act or omission in
failing to provide a safe working environment, unpaid overtime, public holiday
compensation and various other commercial/project disputes. The Group's Legal
Counsel is defending the Group's current position. At present, Acacia considers
the majority of cases to be without merit and therefore the likelihood of any
material unfavourable outcome is remote and therefore no contingency is
required.
a. 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. Overall, it is the current assessment
that the relevant assessments and claims by the TRA are without merit. The
claims include a TRA assessment to the value of US$41.3 million for withholding
tax on certain historic offshore dividend payments paid by Acacia Mining plc to
its shareholders in 2010 to 2013. Acacia is appealing this assessment on the
substantive grounds that, as an English incorporated company, it is not
resident in Tanzania for taxation purposes. The appeal is currently pending at
the Court of Appeal. In addition, the Company has raised certain tax provisions
amounting to US$ 300 million in aggregate, based on the potential impact of a
comprehensive settlement of all outstanding tax disputes, including, according
to Barrick, historic tax claims, reflecting the key terms of the Framework
announcements by Barrick and the GoT in October 2017. Please refer to note 10
for further information.
a. 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 2018 for the remaining special mining
licences and mining licences for building materials amount to US$0.62 million.
a. Purchase commitments
At 31 December 2017, the Group had purchase obligations for supplies and
consumables of approximately US$32.5 million (2016: US$47.0 million).
a. 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$10.2 million in 2017 (2016: US$13.0 million).
1. 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 2017 the Group had no loans of a funding nature due to or from
related parties (31 December 2016: zero).
1. Post Balance Sheet Events
a) Sale of non-core mineral royalty
As previously announced, Acacia has agreed to divest a non-core royalty over
the Houndé Mine in Burkina Faso for total consideration of US$45 million. The
2% net smelter royalty has been owned by Acacia and its predecessor companies
since 2010. Following a competitive process the royalty has been purchased by
Sandstorm Gold Ltd, a TSX- and NYSE-listed company. The transaction has closed
following all conditions being met and monies were received by Acacia in
January 2018.
b) Entry into further gold price protection measures
As previously announced, Acacia has bought additional put options covering
120,000 ounces of gold at a strike price of US$1,320 per ounce for a cost of
US$2.0 million. The options will expire in equal instalments of 30,000 ounces
per month between March and June. These options, in addition to those bought in
September 2017 at a strike price of US$1,300 per ounce, provide a minimum price
for the majority of the Group's expected production for the first half of 2018
above our budgeted gold price of US$1,200 per ounce, with full upside exposure
should the gold price continue to trade above the respective strike prices.
Reserves and Resources
Mineral reserves and mineral resources estimates contained in this Report have
been calculated as at 31 December 2017 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 David Blamires, Manager - Long Term Planning. 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 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 and reflect contained
ounces. Mineral resources at Acacia mines have been calculated using an assumed
long-term average gold price of US$1,400 per ounce, a silver price of US$19.00
per ounce and a copper price of US$2.80 per pound and reflect contained metal.
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
and Golden Ridge (however, this Mineral Resource has now been removed from the
declaration); whilst Nyanzaga is a foreign estimate compiled to JORC Code 2012
and reported above a lower cut-off grade of 1.5g/t. The new Mineral Resource
estimate for the Liranda Project in Kenya is reported above varying lower
cut-off grades appropriate for the mineralisation. 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 http://www.acaciamining.com/ for the Gold Reserves & Resources Tables
END
(END) Dow Jones Newswires
February 12, 2018 02:00 ET (07:00 GMT)
1 Year Acacia Mining Chart |
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