African Barrick Gold Expansion of Bulyanhulu Upper East Project

 
TIDMABG 
 
AFRICAN BARRICK GOLD PLC 
 
3rd October 2012 
 
African Barrick Gold plc (the "Company" or "ABG") 
 
    Expansion of Bulyanhulu Upper East Project and order of long lead items 
 
  * Incorporation of Reef 2 ounces brings total project in excess of 2Moz 
 
  * Incremental additional production will average over 90koz per annum 
 
  * Board approved order of long lead items, production targeted for Q4 2014 
 
  * Project generates a post tax IRR of 34% at current gold prices 
 
ABG has continued to progress the acceleration of mining of the Upper East Zone 
at Bulyanhulu and has received Board approval to begin the ordering of certain 
long lead items for the project. The project was previously solely based on the 
1.2 million ounces (Moz) of reserves located in Reef 1 of the Upper East Zone, 
and we have now completed a positive scoping study to incorporate the 900,000 
ounces (koz) of gold which currently sit in reserves in Reef 2 of the Upper 
East zone. We are now progressing with pre-feasibility and feasibility work on 
Reef 2 with the aim of completing a combined feasibility study for both reefs 
by the end of Q1 2013. Production from the Upper East Zone is targeted to 
commence in late 2014 and is now expected to average in excess of 90koz per 
annum over the life of mine ("LOM") at average cash costs of $608 per ounce. 
 
The incorporation of Reef 2 significantly enhances the project economics, 
driving a post tax IRR of 34% at $1,700 per ounce. The project is estimated to 
require approximately $100 million of pre-production capital, to be spent in 
2013 and 2014 and is planned to deliver life of mine production of 1.86Moz over 
the next 20 years. 
 
Commenting on the project, CEO Greg Hawkins said: "One of our key aims for this 
year is to progress the expansion of Bulyanhulu in order to accelerate the 
realisation of the value provided by the scale of the reserve base. In May we 
received Board approval for the CIL expansion, and we have now successfully 
expanded the scope of the Upper East Project whilst maintaining our planned 
timeline for first production. With the two expansion projects, we now have a 
clear path to increasing production levels at Bulyanhulu towards 400,000 ounces 
per annum over the coming years." 
 
Long Section of grade (g/t Au) x metres plot of Reef 1 highlighting the Upper 
East Zone: 
 
See diagram 
 
Background to the project: 
 
Bulyanhulu is a world class high grade underground mine with reserves of 
10.6Moz at a grade of 11.7g/t Au and total resources of 16.9Moz at 9.7g/t Au 
and in 2011 the mine produced 262koz. Production rates are currently 
constrained by the hoisting capacity of the shaft resulting in a mine life of 
over 25 years. As part of our drive to optimise our assets, ABG has been 
examining options to increase mining rates from Bulyanhulu to bring production 
more into line with the scale of the resource base. 
 
A key part of the analysis has been the Upper East zone which is situated 
approximately 1.5km east of the process plant, on the eastern extension of the 
strike length of the mine. The zone is currently included in reserves and was 
scheduled to be mined later in the mine life. The Upper East was initially 
accessed in 2001 through a 1.8km decline from the central ramping system. Due 
to the low gold price environment the area was subsequently not developed. Over 
the past 18 months ABG has been dewatering and rehabilitating the decline as it 
provides an opportunity to truck ore to surface and therefore bypass the shaft 
constraint. 
 
ABG initially examined the opportunity to bring forward just the ounces 
contained in Reef 1 (1.2Moz at 10.6 g/t Au) and have completed a feasibility 
study into the project, which is awaiting the completion of a test stope before 
being submitted for Board approval. As previously announced, we are 
investigating the possibility of mining Reef 2 in parallel with Reef 1, which 
will allow increased access to mining faces and therefore increase production 
rates from the zone while using the same ramp system. The incorporation of Reef 
2 adds 0.9Moz at 9.7g/t Au to the project, bringing the total reserve ounces 
contained in the Upper East Zone project to 2.1Moz at 10.2g/t Au. 
 
ABG has commenced work on a pre-feasibility and feasibility study to 
incorporate the mining of Reef 2 in parallel with Reef 1 which will utilise the 
shared underground infrastructure. Reef 2 is hosted in a more competent host 
rock and therefore it is planned to utilise lower cost mining methods already 
employed elsewhere at the mine, namely long hole stoping. We estimate this work 
will be completed by the end of Q1 2013 after which time Board approval will be 
sought for the whole project. In order to protect the overall timeline to first 
production, the Board have approved the ordering of certain long lead items to 
ensure that mining operations can commence once Board approval is received. All 
equipment ordered ahead of final Board approval can also be utilised in the 
existing Bulyanhulu operations. The commitment amounts to $4.3 million in 2012 
and $6.5 million in 2013. 
 
With the incorporation of Reef 2 into the project, it is now expected to be of 
sufficient scale to become a standalone operation and benefit from having its 
own dedicated infrastructure, ventilation and personnel in place. 
 
Sensitivity Analysis: 
 
The sensitivity analysis below highlights the returns the project offers at a 
range of gold prices: 
 
Gold price     $/oz            1,200       1,400        1,700       1,800 
 
Post tax IRR     %             17.1%       24.1%        34.3%       37.7% 
 
Desktop rescheduling of the life of mine plan has shown the ability to fully 
replace the Upper East ounces in the current mine plan whilst still maintaining 
the existing production profile and therefore the whole of the Upper East zone 
project provides incremental value to the mine. 
 
Key Life of Mine Operating Metrics: 
 
The key life of mine operating metrics are based upon a combination of the 
feasibility study on Reef 1 and the scoping study on Reef 2. This combination 
of studies in conjunction with the recently approved CIL Expansion Project 
gives the potential to move from 92% to 95% recoveries from the Bulyanhulu 
Upper East ore. The studies show a lower cash cost than current levels, given 
Upper East is closer to surface and will mine material with grades similar to 
current Bulyanhulu operating averages. The ordering of the long lead items 
provides the opportunity to bring forward production from 2015 to Q4 2014. 
 
Operating Metrics 
 
Tonnes Processed                                      6.89Mt 
 
Head Grade                                        9.05g/t Au 
 
Recovery                                                 95% 
 
Brought forward Ounces                               1.86Moz 
 
Operating Cost Per Tonne Milled                       $164.2 
 
Total Cash Cost Per Ounce                               $608 
 
Pre-production Capital                        $99 million(1) 
 
LOM Capital Required                         $379 million(1) 
 
(1) Capital costs are estimated to a +/- 15% accuracy 
 
Upper East Zone Reef 1 and Reef 2 Reserves: 
 
See diagram 
 
Next Steps: 
 
 
We plan to implement the project in two phases. Phase One will commence 
immediately with the ordering of the long lead items. Following completion of 
the combined feasibility study and upon receipt of Board approval project 
development will commence in H1 2013 utilising the dewatered and rehabilitated 
1.8km existing decline to provide access for development of stoping areas. 
 
Phase Two is expected to commence in early 2014, once environmental approvals 
have been granted for ABG to undertake a box cut over the shallower portion of 
the Upper East zone. The box cut will be the location for asecond decline into 
the underground which will be developed in order to open up the shallower 
reserves on reefs 1 and 2. This box cut will allow for an additional 
ventilation intake, improved access to the Upper East reefs 1 and 2 and 
additional truck haulage ability through the new ramp system. 
 
A drill programme is continuing on the Upper East to further test the strike 
extension and to look to convert additional resources into reserves. Initial 
results have been positive and the programme is expected to be completed by the 
end of 2012 with the results then being incorporated into the project. 
 
Primary development will be contracted out to a suitably capable development 
contractor which will allow the primary workforce to focus on existing 
operations. 
 
In tandem with the development, work will commence to increase the capacity of 
the front end of the process plant by 200ktpa bringing capacity to around 
1.4Mtpa, ABG believes that this can be achieved with limited capital spend and 
no impact on operations. 
 
Conference call details: 
 
A conference call will be held for analysts and investors on 3 October, 10am, 
London time with the dial in details below. A short presentation on the Upper 
East zone project will be available on our website ahead of the call: 
www.africanbarrickgold.com 
 
Participant dial-in numbers: [phone] 
 
Password: ABG 
 
Replay dial-in number: [phone] 
 
Access pin: 8926365 
 
ENQUIRIES 
 
For further information contact: 
 
African Barrick Gold plc [phone] 
 
Andrew Wray, Head of Corporate Development & Investor Relations 
 
Giles Blackham, Investor Relations Manager 
 
RLM Finsbury [phone] 
 
Charles Chichester 
 
About ABG 
 
ABG is Tanzania's largest gold producer and one of the five largest gold 
producers in Africa. We have four producing mines, all located in northwest 
Tanzania, and several exploration projects at various stages of development. We 
have a high-quality asset base, solid growth opportunities and a clear 
strategy. 
 
The key pillars to our strategy are: 
 
  * driving operating efficiencies to optimise production from our existing 
    asset base; 
 
  * growing through near mine expansion and development of advanced-stage 
    projects; and 
 
  * organic greenfield growth and acquisitions in Africa. 
 
Maintaining our licence to operate through acting responsibly in relation to 
our people, the environment and the communities in which we operate is central 
to achieving our objectives. 
 
ABG is a UK public company with its headquarters in London. We are listed on 
the Main Market of the London Stock Exchange under the symbol ABG and have a 
secondary listing on the Dar es Salaam Stock Exchange. Historically and prior 
to our initial public offering (IPO), our operations comprised the Tanzanian 
gold mining business of Barrick Gold Corporation (Barrick), our majority 
shareholder. ABG reports in US dollars in accordance with IFRS as adopted by 
the European Union. 
 
Forward-looking statements 
 
This announcement is for information purposes only and does not constitute an 
invitation or offer to underwrite, subscribe for or otherwise acquire or 
dispose of any securities of ABG in any jurisdiction. 
 
This announcement 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, products and services, 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 ABG, which could cause 
actual results and developments to differ materially from those expressed in, 
or implied by, the forward-looking statements. Factors that could cause or 
contribute to differences between the actual results, performance and 
achievements of ABG include, but are not limited to, political, economic and 
business conditions, industry trends, competition, fluctuations in the spot and 
forward price of gold or certain other commodity prices, changes in regulation, 
currency fluctuations (including the US dollar, South African rand and 
Tanzanian shilling exchange rates), ABG's ability to successfully integrate 
future acquisitions, ABG'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 timely and successfully 
process its mineral reserves, risk of trespass, theft and vandalism, changes in 
its business strategy as well as risks and hazards associated with the business 
of mineral exploration, development, mining and production. Although ABG's 
management believes that the expectations reflected in such forward-looking 
statements are reasonable, ABG cannot give assurances that such statements will 
prove to be correct. Accordingly, investors should not place reliance on 
forward looking statements in this announcement. Any forward-looking statements 
in this announcement only reflect information available at the time of 
preparation. Subject to the requirements of the Disclosure and Transparency 
Rules and the Listing Rules or applicable law, ABG explicitly disclaims any 
obligation or undertaking publicly to release the result of any revisions to 
any forward-looking statements in this announcement that may occur due to any 
change in ABG's expectations or to reflect events or circumstances after the 
date of this announcement. Nothing in this announcement should be construed as 
a profit forecast or estimate. 
 
For a breakdown of Bulyanhulu's reserves and resources, refer to the 2011 
Annual Report 
 
 
 
END