Teranga Gold Exceeds 2019 Production Guidance and Achieves Low End of Per Ounce Cost Guidance Ranges
Initial 2020 production guidance expected in the 350,000-ounce range with update to come following the expected integration of Massawa
(Unaudited)
TORONTO, Feb. 21, 2020 (GLOBE NEWSWIRE) -- Teranga Gold Corporation ("Teranga" or the "Company") (TSX:TGZ; OTCQX:TGCDF) today reported its operating, financial and development results for the three and twelve months ended December 31, 2019.
FOURTH QUARTER 2019 HIGHLIGHTS Three months ended December 31, 2019 compared to the three months ended December 31, 2018
Gold production for the fourth quarter increased by 54% to a record 91,411 ounces.
Construction of Wahgnion was completed ahead of schedule and approximately $15 million under budget with commercial production declared effective November 1, 2019.
As a result of the record fourth quarter, the Company achieved its fourth consecutive year of consolidated record production with 288,768 ounces of gold produced in 2019, exceeding the top end of the production guidance range of 245,000-270,000 ounces by 7%.
Higher fourth quarter cost of sales, cash costs(1) and all-in sustaining costs(1) due to the large amount of unsold gold at year-end. Had the gold bullion inventory been sold before year-end, the various cost per ounce metrics would have been in line with the prior year.
Full year consolidated per ounce cost of sales, cash costs(1) and all-in sustaining costs(1) were either below or at the lower end of guidance ranges for the year.
Revenues and gross profit for the fourth quarter were 40% and 50% higher, respectively due to higher gold sales with the addition of the Company’s second mine Wahgnion and higher gold prices.
Net cash flows from Sabodala increased to $13 million, raising the full year amount by 80% to $81.5 million.
Revenues, gross profit, earnings, cash flow, EBITDA(1) and per ounce costs were all negatively impacted for the fourth quarter and full year by the large amount of unsold gold at year-end due to an earlier than normal cut-off for shipments. In total, just over 20,000 ounces of gold bullion inventory remain unsold at year-end. The value of the gold bullion inventory totalled $31 million at the year-end spot gold price.
Announced the acquisition of the high-grade Massawa Gold Project (“Massawa”), which is expected to close in the first quarter and contribute to 2020 production commencing in the second half of the year.
“2019 was a year of significant achievement for Teranga and, as a result, we are a much stronger company and offer a significantly improved value proposition to our shareholders than just 12 months ago. Our second gold mine – Wahgnion – is now in commercial production, and we are preparing to complete our transformational acquisition of Massawa, a high-grade, top tier asset that neighbours our Sabodala mine in Senegal,” said Richard Young, President and CEO. “With the advancements made in 2019, the course is set for an exciting year ahead as we start repositioning Teranga as a low cost, mid-tier gold producer.”
Paul Chawrun, Chief Operating Officer, noted, “Operationally, Sabodala has never been stronger and is well-positioned to start processing feed from the Massawa deposits in the second half of the year. Wahgnion is off to a very good start, and plant throughput is above nameplate capacity. Reconciliation to reserves is largely in-line, save for some artisanal mining near surface in both active pits. With our two gold producing assets running smoothly, our attention in 2020 is turning to the exploration of the properties in our growth pipeline.”
FINANCIAL & OPERATING HIGHLIGHTS Three and twelve months ended December 31, 2019 compared to three and twelve months ended December 31, 2018
(Unaudited)
Three months ended December 31,
Twelve months ended December 31,
Financial Data
2019
2018
Change
2019
2018
Change
Revenue
($000s)
106,341
76,140
40
%
353,490
312,628
13
%
Cost of sales
($000s)
(81,169
)
(59,374
)
37
%
(264,814
)
(230,517
)
15
%
Gross profit
($000s)
25,172
16,766
50
%
88,676
82,111
8
%
Net (loss)/profit attributable to shareholders of Teranga
($000s)
(13,371
)
(10,639
)
26
%
(33,393
)
11,794
N/A
Per share
($)
(0.12
)
(0.10
)
26
%
(0.31
)
0.11
N/A
Adjusted net (loss)/profit attributable to shareholders of Teranga1
($000s)
(6,289
)
1,229
N/A
1,162
18,075
(94
%)
Per share1
($)
(0.06
)
0.01
N/A
0.01
0.17
(94
%)
EBITDA1
($000s)
24,168
14,588
66
%
104,599
121,578
(14
%)
Adjusted EBITDA1
($000s)
32,492
21,848
49
%
130,175
113,506
15
%
Operating cash flow excluding changes in working capital excluding inventories
($000s)
13,406
25,384
(47
%)
54,818
96,649
(43
%)
Operating cash flow
($000s)
21,458
41,784
(49
%)
99,597
92,060
8
%
Sustaining capital expenditures (excluding deferred stripping)4
($000s)
4,687
2,337
101
%
11,345
10,769
5
%
Capitalized deferred stripping - sustaining
($000s)
2,789
13,526
(79
%)
29,755
45,978
(35
%)
Growth capital expenditures4
($000s)
16,746
56,564
(70
%)
136,506
145,411
(6
%)
(Unaudited)
Three months ended December 31,
Twelve months ended December 31,
Operating Data
2019
2018
Change
2019
2018
Change
Gold produced2
(oz)
91,411
59,442
54
%
288,768
245,230
18
%
Gold sold3
(oz)
72,342
61,696
17
%
257,227
246,073
5
%
Average realized gold price1,3
($ per oz)
1,479
1,232
20
%
1,377
1,271
8
%
Cost of sales per ounce3
($ per oz sold)
1,122
962
17
%
1,029
937
10
%
Total cash costs1,3
($ per oz sold)
779
692
12
%
706
660
7
%
All-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs) per ounce1,3,4
($ per oz sold)
1,080
943
15
%
917
907
1
%
Q4 2019 FINANCIAL & OPERATING HIGHLIGHTS Three months ended December 31, 2019 compared to three months ended December 31, 2018
Consolidated Financial Performance
Revenues, gross profit, earnings, cash flow, EBITDA(1) and per ounce costs were all negatively impacted for the fourth quarter and full year by the large amount of unsold gold at year-end due to an earlier than normal cut-off for shipments. In total, just over 20,000 ounces of gold bullion inventory remain unsold at year-end. The value of the gold bullion inventory totalled $31.2 million at the year-end spot gold price of $1,515 per ounce.
Consolidated net loss attributable to shareholders was $13.4 million ($0.12 loss per share) for the fourth quarter 2019 compared to $10.6 million ($0.10 loss per share) in the prior year period. Higher gross profit and lower net losses on derivative financial instruments was more than offset by non-cash losses on changes in fair values of share warrant liabilities and gold offtake payment liability, higher finance costs, share-based compensation expenses and net foreign exchange losses totalling $14.1 million.
Adjusted net loss attributable to shareholders(1) was $6.3 million ($0.06 loss per share) for the fourth quarter 2019 compared to adjusted net profit attributable to shareholders(1) of $1.2 million ($0.01 earnings per share) in the comparative period. Higher gross profit was more than offset by higher income tax expense (excluding the impact of foreign exchange on deferred taxes), finance costs, share-based compensation expenses, net foreign exchange losses and business and other taxes.
EBITDA(1) increased to $24.2 million from $14.6 million mainly due to higher revenues of $30.2 million, partially offset by higher mine operation expenses of $14.1 million, net foreign exchange losses of $2.5 million and share-based compensation expense of $2.9 million.
Adjusted EBITDA(1) increased to $32.5 million from $21.8 million mainly due to higher gross profit as a result of higher gold ounces sold and higher average realized prices(1), partially offset by higher share-based compensation expense.
Cash flow related to operating activities decreased 49% year-over-year to $21.5 million due to the timing of gold shipments and an increase of supplies inventory at Wahgnion of $3.4 million. Using a period-end gold spot price of $1,515 per ounce, the 20,000 ounces of unsold bullion inventory would have increased cash flow by $31.2 million.
Cash and cash equivalents totalled $29.7 million, an increase of $1.8 million from the third quarter 2019 balance of $27.9 million. The marginal increase was mainly due to net cash flows of $13.0 million from the Sabodala mine, drawdowns of $11.7 million from the secured development finance facility with Taurus Funds Management Pty Ltd. and net drawdowns of $0.6 million from the equipment finance facility with Caterpillar Financial Services Corporation which was largely offset by $27.2 million in cash capital expenditures related to the construction of Wahgnion.
Consolidated cost of sales per ounce was $1,122, an increase of 17% compared to the prior year period mainly due to higher mine production costs and depreciation at Wahgnion and lower capitalized deferred stripping costs, partially offset by net inventory movements and higher gold ounces sold between periods. Full year consolidated cost of sales per ounce was $1,029, below the low-end of the Company's 2019 guidance range.
Consolidated total cash costs per ounce(1) were $779, an increase of 12% compared to the prior year period mainly due to higher mine production costs with Wahgnion and lower capitalized deferred stripping costs, partially offset by net inventory movements and higher gold ounces sold between periods, despite 20,000 ounces of gold bullion inventory unsold at year-end.
Consolidated all-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs) per ounce(1) were $1,080, an increase of 15% as a result of higher consolidated total cash costs(1), higher share-based compensation expense and higher capital expenditures, partially offset by higher gold ounces sold, despite 20,000 ounces of gold bullion inventory unsold at year-end. Full year consolidated all-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs) per ounce(1) were $917, near the low-end of the Company's 2019 guidance range, despite the unsold gold bullion inventory at year-end.
Sabodala Gold Operations (Senegal)
Fourth quarter and full year gold production at Sabodala were 54,539 ounces and 241,276 ounces, respectively, surpassing Sabodala's 2019 production guidance of 215,000 to 230,000 ounces.
Total cost of sales per ounce sold increased by 14% to $1,099 per ounce in the fourth quarter 2019 compared with the fourth quarter 2018 primarily due to lower gold ounces sold, higher depreciation and amortization expense and lower capitalized deferred stripping costs between periods, partially offset by net inventory movements and lower mine production costs in the fourth quarter 2019. In total, 9,000 ounces of gold bullion inventory was unsold at year-end due to an earlier than normal cut-off for shipping.
All-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs) per ounce(1) were $940 in the fourth quarter 2019, an increase of 12% compared to the prior year period mainly as a result of lower gold ounces sold, partially offset by lower cash costs(1) and lower capital expenditures between periods.
Sabodala generated net cash flow of $13.0 million, increasing the full year net cash flow to $81.5 million, an increase of 80% over the prior year period.
Wahgnion Gold Operations (Burkina Faso)
Wahgnion achieved commercial production effective November 1, 2019. Fourth quarter gold production at Wahgnion was 36,872 ounces, including 8,344 ounces of pre-commercial gold production.
Wahgnion surpassed the high end of its full year production guidance of 30,000 to 40,000 ounces with a total of 47,492 ounces of gold produced, including 18,964 ounces of pre-commercial gold production.
Total cost of sales per ounce sold was $1,170 per ounce, below the lower end of 2019 guidance.
Total cash cost per ounce(1) sold for the quarter was $861 per ounce.
All-in sustaining costs (excluding non-cash inventory movements) per ounce sold(1) of $938 was above full year guidance. Had the large amount of unsold gold bullion inventory been sold before year-end, all-in sustaining costs (excluding non-cash inventory movements) per ounce(1) would have been $780 per ounce, which was within the guidance range. In total, 11,000 ounces or nearly 40% of commercial production were unsold at year-end. Being the new gold producer in Burkina Faso, the last shipment date we could secure was in mid-December, which meant that a large portion of December’s production was not shipped and sold at year-end.
GROWTH HIGHLIGHTS
On December 9, 2019, the Company entered into a definitive agreement pursuant to which it will acquire a 90% interest in Massawa from a wholly-owned subsidiary of Barrick Gold Corporation and its joint venture partner, Compagnie Sénégalaise de Transports Transatlantiques Afrique de l’Ouest SA, with the Government of Senegal holding the remaining 10% interest in Massawa (the “Massawa Acquisition”). Massawa is one of the highest-grade undeveloped open-pit gold projects in Africa. It is located within trucking distance of Teranga’s flagship Sabodala mine in Senegal, creating the opportunity for significant capital and operating synergies. Upon completion of the Massawa Acquisition, the Sabodala-Massawa Complex is expected to transform Sabodala into a top tier asset.
On February 13, 2020, the Company obtained certain key approvals and acknowledgement from the Government of Senegal required in order to proceed to close the Massawa Acquisition. The approvals included a formal consent to Teranga’s plans to integrate Massawa into Sabodala, as well as a formal intent of the Government of Senegal to waive its equity participation right to elect, on its behalf or on behalf of the private sector, to purchase up to an additional 25% equity interest in Massawa at market value. With these approvals in place, the Company currently anticipates issuance of the Massawa exploitation license and residual exploration license imminently.
At Golden Hill, the Company’s most advanced exploration project located in Burkina Faso, a 27,000-metre drill program was initiated during the second half of 2019 to increase the resource base. Initial environmental and social studies have started and engineering has commenced to support the application for a mine license in 2020. During the quarter, the Company drew down $2.0 million from the Golden Hill Tranche of the Taurus Facility to fund the exploration program. In total, $4.5 million has been drawn from the Golden Hill Tranche of the Taurus Facility to fund the exploration program.
On January 22, 2020, the Company announced results from its drilling program at Golden Hill which has returned high-grade gold intercepts from near surface to depth at several existing targets and encouraging gold grades in numerous step-out holes. The campaign has also uncovered a new discovery at Golden Hill - the Ma Jonction prospect, located between Ma Main and Ma North.
Total tonnes mined were 15% lower in the fourth quarter 2019 compared with the prior year period due to prioritization of higher grade, lower stripping mining areas of Golouma West and Kerekounda.
Ore tonnes mined were 114% higher in fourth quarter 2019 compared with fourth quarter 2018 due primarily to the commencement of mining near surface ore at Maki Medina and the prioritization of higher grade, lower stripping mining areas within Golouma West. Ore grade mined was 19% lower in fourth quarter 2019 compared with the prior year period due primarily to the completion of the relatively high grade Kerekounda and Koulouqwinde pits in the fourth and first quarters of 2019, respectively.
Reconciliation to reserves remained positive for fourth quarter 2019, with total ounces mined exceeding reserves model estimations due to ongoing dilution control, ore recovery processes and conservative resource modelling.
Processing
Ore tonnes milled in the fourth quarter 2019 were slightly lower compared with the prior year period due to a higher proportion of harder fresh ore.
Head grade decreased by 5% in the fourth quarter 2019 due primarily to mill feed from the high grade Gora deposit in the prior year period.
Gold production decreased by 8% to 54,539 ounces in the fourth quarter 2019 compared with the prior year period due to lower average head grades, recovery rates and ore tonnes milled between periods.
Pre-Commercial production period, January 1 to October 31, 2019
Commercial production period, November 1 to December 31, 2019
Twelve month ended December 31, 2019
Ore mined
('000t)
881
651
1,532
Waste mined
('000t)
6,686
3,933
10,619
Total mined
('000t)
7,567
4,584
12,151
Grade mined
(g/t)
1.30
1.47
1.37
Ounces mined
(oz)
36,738
30,794
67,532
Strip ratio
(waste/ore)
7.6
6.0
6.9
Ore milled
('000t)
451
507
958
Head grade
(g/t)
1.39
1.84
1.63
Recovery rate
(%)
94.1
95.2
94.7
Gold produced
(oz)
18,964
28,528
47,492
Gold sold
(oz)
10,725
23,722
34,447
Mining
In the fourth quarter 2019, mining capacity consisted of an owner-operated fleet, supplemented by two mining contractor fleets. Mining activities were focused primarily on the Nogbele pit and the lower benches of the Nangolo pit. A total of 6.1 million tonnes were mined during the quarter at a strip ratio of 5.8. Overall tonnes mined was in line with the plan. At the end of the fourth quarter, one of the remaining two contractor mining fleet was demobilized and the process of transitioning to a fully owner-operated fleet is expected to continue into 2020.
Reconciliation to reserves is showing positive results for the Nangolo pit at depth with the overall reconciliation slightly positive. While still very early, the overall reconciliation in the Nogbele pit is slightly negative to reserves to 2019 year-end, however, continues to improve as mining activities progress at depth below artisanal workings in the upper oxide zones, with an overall positive reconciliation for January 2020.
Processing
Ramp-up of the processing plant continued during the fourth quarter 2019, with production stabilizing at above nameplate capacity. On November 1, 2019, the processing plant achieved the design criteria and commercial production was declared. The crusher feed blend comprised 74% oxide ore and 26% fresh hard rock. Modifications made to the crushing circuit combined with a drier ore feed, due to the end of the rainy season, increased crusher throughput. Mill throughput for fourth quarter 2019 was above plan at 0.7 million tonnes due to earlier than planned commissioning of the processing plant, higher portion of oxide ore processed and an increase from the nameplate design. Gold production for the quarter was 36,872 ounces at an average head grade of 1.73 g/t.
2020 OUTLOOK (excluding Massawa)
The Company’s 2020 guidance does not include production from Massawa’s high-grade Sofia deposit. Following the anticipated closing of the Massawa Acquisition, guidance for 2020 production is expected to increase with the commencement of mining and processing of high-grade ore from the first of the Massawa deposits – Sofia – in H2 2020.
Teranga’s 2020 production and cost guidance will be updated in the third quarter to incorporate mining and processing of Sofia ore.
A comprehensive table of Teranga’s full-year guidance for 2020 is expected to be available shortly in the management’s discussion & analysis for the three and twelve months ended December 31, 2019. A summary of 2020 guidance is as follows:
Sabodala-Massawa Complex • Expect to produce 215,000 ounces of gold before the addition of ore from Massawa’s Sofia deposit, expected in H2 2020 • Close the Massawa Acquisition, expected in Q1 2020 • Prepare for mining to commence at the high-grade Sofia deposit • Release pre-feasibility study for the combined complex within six months after the transaction close • Commence exploring for additional refractory and oxide deposits
Wahgnion Gold Mine • Expect to produce 130,000-140,000 ounces of gold in first full year of production • Relaunch resource drilling program
Golden Hill Exploration Project • Exploration program with a $10 million budget to expand the resource base • Complete engineering, environmental, and social work to support the preliminary economic assessment required for a mine license application in Q3 2020
Exploration Projects in Côte d’Ivoire • Increase the exploration budget to $6 to $8 million for the Afema and Miminvest exploration properties.
CONSOLIDATED FINANCIAL STATEMENTS
Teranga’s audited consolidated financial statements and management’s discussion & analysis for the three and twelve months ended December 31, 2019 are expected to be available shortly on the Company’s website at www.terangagold.com, on SEDAR at www.sedar.com, and on the OTC Markets’ website at www.otcmarkets.com.
CONFERENCE CALL & WEBCAST
Teranga will host a conference call and audio webcast today at 8:30 a.m. ET, during which management will review the highlights for the three and twelve months ended December 31, 2019. Those wishing to listen can access the live conference call and webcast as follows:
Date & Time:
Friday, February 21, 2020 at 8:30 a.m. ET
Telephone:
Toll-free +1-877-291-4570
Local or International +1-647-788-4919
Please allow 10 minutes to be connected to the conference call.
The conference call replay will be accessible for two weeks after the call by dialing +1-416-621-4642 or toll-free at +1-800-585-8367 and entering the conference ID 1673615.
Note:
The slide presentation will be available for download at www.terangagold.com for simultaneous viewing during the call.
APPENDICES
Please see the following pages for the unaudited consolidated financial statements, 2019 performance and 2020 outlook.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS/INCOME (In thousands of United States dollars)
(Unaudited)
For the years ended December 31,
2019
2018
Revenue
353,490
312,628
Mine operation expenses
-184,248
-164,349
Depreciation and amortization
-80,566
-66,168
Cost of sales
-264,814
-230,517
Gross profit
88,676
82,111
Exploration and evaluation expenditures
-11,021
-13,160
Administration expenses
-14,523
-13,618
Corporate social responsibility expenses
-4,330
-3,700
Share-based compensation
-8,464
-4,851
Finance costs
-21,072
-15,783
Net foreign exchange losses
-3,517
-2,680
Other (expenses)/income
-30,384
8,458
Operating expenses
-93,311
-45,334
(Loss)/profit before income tax
-4,635
36,777
Income tax expense
-25,317
-23,312
Net (loss)/profit for the year
-29,952
13,465
Net (loss)/profit attributable to:
Shareholders
-33,393
11,794
Non-controlling interests
3,441
1,671
Net (loss)/profit for the year
-29,952
13,465
Other comprehensive loss attributable to:
Change in fair value of marketable securities, net of tax
-79
-717
Other comprehensive loss for the year
-79
-717
Total comprehensive (loss)/income for the year
-30,031
12,748
Total comprehensive (loss)/income attributable to:
Shareholders
-33,472
11,077
Non-controlling interests
3,441
1,671
Total comprehensive (loss)/income for the year
-30,031
12,748
(Loss)/earnings per share from operations attributable to the shareholders of the Company during the period
- Basic (loss)/earnings per share
-0.31
0.11
- Diluted (loss)/earnings per share
-0.31
0.11
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In thousands of United States dollars)
(Unaudited)
As at December 31, 2019
As at December 31, 2018
Current assets
Cash and cash equivalents
29,717
46,615
Restricted cash
103,593
0
Trade and other receivables
13,581
9,079
Inventories
84,430
65,608
Marketable securities
245
324
Other current assets
5,015
10,945
Total current assets
236,581
132,571
Non-current assets
Inventories
92,166
86,105
Property, plant and equipment
831,186
700,464
Deferred income tax assets
11,213
16,196
Other non-current assets
4,664
4,551
Total non-current assets
939,229
807,316
Total assets
1,175,810
939,887
Current liabilities
Trade and other payables
90,732
75,094
Subscription receipts liability
101,531
0
Borrowings
42,906
0
Current income tax liabilities
16,307
13,124
Gold stream liability
7,158
14,860
Deferred revenue
14,380
0
Derivative financial liabilities
10,786
0
Provisions
13,989
7,240
Gold offtake payment liability
2,534
0
Lease liabilities
3,805
0
Total current liabilities
304,128
110,318
Non-current liabilities
Borrowings
138,869
87,097
Gold offtake payment liability
12,824
13,699
Share warrant liabilities
9,406
1,969
Gold stream liability
66,970
73,902
Provisions
50,713
35,328
Lease liabilities
5,942
0
Other non-current liabilities
8,055
10,447
Total non-current liabilities
292,779
222,442
Total liabilities
596,907
332,760
Equity
Issued capital
497,642
497,257
Foreign currency translation reserve
-998
-998
Other components of equity
7,143
5,800
Retained earnings
45,140
78,533
Equity attributable to shareholders
548,927
580,592
Non-controlling interests
29,976
26,535
Total equity
578,903
607,127
Total equity and liabilities
1,175,810
939,887
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of United States dollars)
(Unaudited)
For the years ended December 31,
2019
2018
Cash flows related to operating activities
Net (loss)/profit for the year
-29,952
13,465
Add/(deduct) items not affecting cash:
Depreciation of property, plant and equipment
39,694
27,475
Depreciation of capitalized mine development costs
35,907
44,605
Amortization of right-of-use assets
2,661
0
Inventory movements - depreciation
3,983
-1,486
Capitalized deferred stripping - depreciation
-1,457
-2,728
Amortization of advanced royalties
2,802
2,746
Unrealized losses/(gains) on derivative instruments
15,171
-2,553
Amortization of intangibles
386
396
Amortization of deferred financing costs
2,784
1,893
Accretion expenses
8,125
9,723
Share-based compensation
8,464
4,851
Re-measurement of gold stream liability
-1,108
0
Amortization of gold stream liability
-21,140
-22,500
Deferred income tax expense
4,982
10,295
Unrealized losses/(gains) on revaluation of share warrant liabilities
5,759
-1,136
Unrealized losses/(gains) on revaluation of gold offtake payment liability
2,177
-317
Re-measurement of contingent consideration
-2,242
0
Interest on borrowings
6,688
1,485
(Increase)/decrease in inventories
-28,866
10,435
Cash flows related to operating activities before changes in working capital excluding inventories
54,818
96,649
Changes in working capital excluding inventories
44,779
-4,589
Net cash provided by operating activities
99,597
92,060
Cash flows related to investing activities
Expenditures for property, plant and equipment
-111,277
-123,896
Expenditures for mine development
-66,329
-78,262
Expenditures for intangibles
-1,294
-656
Acquisition of non-controlling interest in Afema Project
-2,500
-5,303
Cash acquired from Afema
0
140
Investment in marketable securities
0
-77
Investment in Boss Gold and Boss Minerals
0
-7,242
Increase in restricted cash
-103,458
0
Net cash used in investing activities
-284,858
-215,296
Cash flows related to financing activities
Drawdown of borrowings
90,676
112,200
Repayment of borrowings
-1,243
-15,000
Financing costs paid
-2,216
-12,278
Proceeds from stock options exercised
259
609
Interest paid on borrowings
-15,937
-5,391
Settlement of gold offtake payment liability
-518
0
Lease payments
-3,239
0
Issuance of subscription receipts
106,347
0
Payments of subscription receipts issuance costs
-2,889
0
Net cash provided by financing activities
171,240
80,140
Effect of exchange rates on cash holdings in foreign currencies
-2,877
2,040
Net decrease in cash and cash equivalents
-16,898
-41,056
Cash and cash equivalents at the beginning of year
46,615
87,671
Cash and cash equivalents at the end of year
29,717
46,615
Taxes paid in Cash
23,629
5,942
The accompanying notes are an integral part of these consolidated financial statements.
2019 PERFORMANCE
(Unaudited)
Year ended December 31, 2019
2019 Actual
Third quarter 2019 Guidance
Sabodala Operating Results
Total mined
(‘000t)
33,886
37,000 - 39,500
Ore mined
(‘000t)
2,909
3,000 - 3,500
Grade mined
(g/t)
2.15
1.50 - 2.00
Strip ratio
waste/ore
10.6
9.5 - 12.0
Ore milled
(‘000t)
4,161
4,100 - 4,300
Head grade
(g/t)
1.98
1.80 - 2.00
Recovery rate
%
90.9
89.0 - 91.0
Gold produced A
(oz)
241,276
215,000 - 230,000
Cost of sales
$/oz sold
1,015
1,050 - 1,125
Total cash costs B
$/oz sold
690
725 - 775
All-in sustaining costs C
$/oz sold
857
900 - 975
Non-cash inventory movements and amortized advanced royalty costs D
$/oz sold
-50
-75
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs) C
$/oz sold
807
825 - 900
Mining
($/t mined)
2.74
2.50 - 2.75
Mining long haul
($/t hauled)
1.36
1.50 - 2.00
Milling
($/t milled)
11.19
12.00 - 13.00
General and administration
($/t milled)
4.82
4.50 - 5.00
Mine production costs
$ millions
163
165 - 180
Capital Expenditures
Sustaining capital D
$ millions
9
10 - 15
Resettlement capital
$ millions
11
15 - 20
Total Capital Expenditures
$ millions
20
25 - 35
Wahgnion Operating Results
Total mined E
(‘000t)
12,151
8,000 - 10,000
Ore mined E
(‘000t)
1,532
1,000 - 1,200
Grade mined
(g/t)
1.37
1.80 - 2.00
Ore milled
(‘000t)
958
500 - 650
Head grade
(g/t)
1.63
1.80 - 2.00
Recovery rate
%
94.7
~ 90.0
Gold produced F
(oz)
47,492
30,000 - 40,000
Cost of sales F
$/oz sold
1,170
1,175 - 1,250
All-in sustaining costs C, F
$/oz sold
950
1,050 - 1,125
Non-cash inventory movements C, F
$/oz sold
-12
-300
All-in sustaining costs (excluding non-cash inventory movements) C, F
$/oz sold
938
750 - 825
Wahgnion Capital Expenditures
Construction
$ millions
110
115 - 120
Pre-commercial production costs F
$ millions
40
~ 30
Total Wahgnion Capital Expenditures F
$ millions
150
145 - 150
Corporate and Other
Corporate administration expense
$ millions
15
13 - 14
Share-based compensation expense G
$ millions
8.5
3.5 - 4.5
Regional administration costs
$ millions
3
2 - 3
Community social responsibility expense
$ millions
4
4 - 5
Exploration and evaluation H
$ millions
11
10 - 15
Consolidated
Gold produced
(oz)
288,768
245,000 - 270,000
Cost of sales F
$/oz sold
1,029
1,050 - 1,125
All-in sustaining costs C, F
$/oz sold
963
1,000 - 1,100
Non-cash inventory movements and amortized advanced royalty costs C, F
$/oz sold
-46
-100
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs) C, F
$/oz sold
917
900 - 1,000
Notes to Guidance Table Above:
A. 22,500 ounces of Sabodala gold production were to be sold to Franco-Nevada Corporation (“Franco-Nevada”) at 20 percent of the spot gold price. All Wahgnion gold production was subject to a gold offtake payment agreement with Taurus Funds (“Offtake Agreement”) up to 1,075,000 ounces.
B. Total cash costs per ounce sold is a non-IFRS financial measure and does not have a standard meaning under IFRS.
C. All-in sustaining costs per ounce is a non-IFRS financial measure and does not have a standard meaning under IFRS. All-in sustaining costs per ounce sold calculated at the mine site level includes only total cash costs per ounce and sustaining capital expenditures. All-in sustaining costs for Sabodala includes sustaining capital expenditures but excludes growth capital related to the Sabodala village resettlement. Corporate administration and share-based compensation expense are presented separately in this table and are not allocated to the mine site level costs. All-in sustaining costs presented on a consolidated basis includes corporate administration and share-based compensation expense. All-in sustaining costs also includes non-cash inventory movements and non-cash amortization of advanced royalties.
D. Excluded capitalized deferred stripping costs, included in mine production costs.
E. These figures were updated in second quarter 2019 to reflect initial estimates based on the new plan for Wahgnion that was being developed.
F. These amounts may change depending on the point at which commercial production is reached at Wahgnion. Until such point, all pre-commercial production costs are capitalized and proceeds from gold ounces sold are recorded as a reduction to the Wahgnion development asset.
G. Share-based compensation expense assumed an average price of C$4.00 per Teranga share.
H. Exploration and evaluation costs included both expensed exploration, primarily attributable to exploration work on exploration permits, and capitalized reserve development, which was work performed on mine licenses. In the second quarter, we increased the lower end of the range from $5 million to $10 million to reflect actual and expected spend. The higher end of the range was not changed.
This forecast financial information was based on the following material assumptions for the remainder of 2019: gold price: $1,350 per ounce; Brent Crude Oil: $62 per barrel; and Euro:USD exchange rate of 1:1.15.
Other important assumptions: any political events are not expected to impact operations, including movement of people, supplies and gold shipments; grades and recoveries is expected to remain consistent with the life-of-mine plan to achieve the forecast gold production; and no unplanned delays in or interruption of scheduled production.
2020 OUTLOOK
2020 Guidance Sabodala
2020 Guidance Wahgnion
2020 Guidance Consolidated
Total mined
(‘000t)
35,000
18,000 - 20,000
Ore mined
(‘000t)
5,000 - 6,000
2,500 - 3,000
Grade mined
(g/t)
1.40 - 1.60
1.70 - 1.80
Strip ratio
waste/ore
5.0 - 6.0
6.0 - 7.0
Ore milled
(‘000t)
4,000 - 4,200
2,500 - 2,700
Head grade
(g/t)
1.75 - 1.85
1.80 - 2.00
Recovery rate
%
88 - 90
91 - 93
Gold produced A
(oz)
215,000
130,000 - 140,000
345,000 - 355,000
Cost of sales
$/oz sold
1,050 - 1,150
1,025 - 1,175
1,075 - 1,200
Total cash costs B
$/oz sold
750 - 800
775 - 850
All-in sustaining costs C
$/oz sold
875 - 950
900 - 1,000
975 - 1,100
Cash/(non-cash) inventory movements and amortized advanced royalty costs C
$/oz sold
25
-50
-25
All-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs) C
$/oz sold
900 - 975
850 - 950
950 - 1,075
Mining
($/t mined)
2.50 - 2.75
2.15 - 2.40
Mining long haul
($/t hauled)
1.25 - 1.75
Milling
($/t milled)
11.00 - 12.00
12.00 - 13.00
General and administration
($/t milled)
4.50 - 5.00
7.00 - 8.00
Mine production costs
$ millions
160 - 170
90 - 100
Capital Expenditures
Sustaining capital D
$ millions
15 - 20
15 - 20
Resettlement capital
$ millions
10 - 15
10 - 15
Corporate and Other
Corporate administration expense
$ millions
16 - 17
Share-based compensation expense E
$ millions
~8
Regional administration costs
$ millions
~6
Community social responsibility expense
$ millions
9 - 10
Exploration and evaluation F
$ millions
20 - 25
Notes to Guidance Table Above:
A. Based on the 2020 guidance, 12,900 ounces of Sabodala gold production are to be sold to Franco-Nevada Corporation (“Franco-Nevada”) at 20 percent of the spot gold price. All Wahgnion gold production is subject to a gold offtake payment agreement with Taurus Funds (“Offtake Agreement”) up to 1,075,000 ounces.
B. Total cash costs per ounce sold is a non-IFRS financial measure and does not have a standard meaning under IFRS.
C. All-in sustaining costs per ounce is a non-IFRS financial measure and does not have a standard meaning under IFRS. All-in sustaining costs per ounce sold calculated at the mine site level includes only total cash costs per ounce and sustaining capital expenditures. All-in sustaining costs for Sabodala includes sustaining capital expenditures but excludes growth capital related to village resettlement expenditures. Corporate administration and share-based compensation expense are presented separately in this table and are not allocated to the mine site level costs. All-in sustaining costs presented on a consolidated basis includes corporate administration and share-based compensation expense. All-in sustaining costs also includes non-cash inventory movements and non-cash amortization of advanced royalties.
D. Excludes capitalized deferred stripping costs, included in mine production costs.
E. Share-based compensation expense assumes an average price of C$9.00 per Teranga share.
F. Exploration and evaluation costs includes both expensed exploration, primarily attributable to exploration work on exploration permits, and capitalized reserve development, which is work performed on mine licenses.
This outlook financial information is based on the following material assumptions for 2020: gold price: $1,450 per ounce; Brent Crude Oil: $60 per barrel; and Euro:USD exchange rate of 1:1.10.
The Company assumes a corporate income tax rate of 25 percent in Senegal and 17.5 percent in Burkina Faso.
Other important assumptions: any political events are not expected to impact operations, including movement of people, supplies and gold shipments; grades and recoveries is expected to remain consistent with the life-of-mine plan to achieve the forecast gold production; and no unplanned delays in or interruption of scheduled production.
ENDNOTES
(1) NON-IFRS FINANCIAL MEASURES
The Company provides some non-IFRS financial measures as supplementary information that management believes may be useful to investors to explain the Company’s financial results.
Beginning in the second quarter of 2013, we adopted an “all-in sustaining costs” measure consistent with the guidance issued by the World Gold Council (“WGC”) on June 27, 2013, of which Teranga became a member on November 27, 2018. The Company believes that the use of all-in sustaining costs is helpful to analysts, investors and other stakeholders of the Company in assessing its operating performance, its ability to generate free cash flow from current operations and its overall value. This measure is helpful to governments and local communities in understanding the economics of gold mining. The “all-in sustaining costs” is an extension of existing “cash cost” metrics and incorporate costs related to sustaining production.
“Total cash cost per ounce sold” is a common financial performance measure in the gold mining industry but has no standard meaning under IFRS. The Company reports total cash costs on a sales basis. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The measure, along with sales, is considered to be a key indicator of a Company’s ability to generate operating profits and cash flow from its mining operations.
Total cash costs figures are calculated in accordance with a standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold Institute ceased operations in 2002, but the standard is considered the accepted standard of reporting cash cost of production in North America. Adoption of the standard is voluntary and the cost measures presented may not be comparable to other similarly titled measure of other companies.
The WGC definition of all-in sustaining costs seeks to extend the definition of total cash costs by adding corporate general and administrative costs, reclamation and remediation costs (including accretion and amortization), exploration and study costs (capital and expensed), capitalized stripping costs and sustaining capital expenditures and represents the total costs of producing gold from current operations. All-in sustaining costs exclude income tax payments, interest costs, costs related to business acquisitions and items needed to normalize profits. Consequently, this measure is not representative of all of the Company’s cash expenditures. In addition, the calculation of all-in sustaining costs and all-in costs does not include depreciation expense as it does not reflect the impact of expenditures incurred in prior periods. Therefore, it is not indicative of the Company’s overall profitability.
The Company also expands upon the WGC definition of all-in sustaining costs by presenting an additional measure of “All-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs)”. This measure excludes cash and non-cash inventory movements and amortized advanced royalty costs which management does not believe to be true cash costs and are not fully indicative of performance for the period.
“Total cash costs per ounce”, “all-in sustaining costs per ounce” and “all-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs) per ounce” are intended to provide additional information only and do not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. The following tables reconcile the most directly comparable IFRS measure to these non-IFRS measures.
“Average realized price” is a financial measure with no standard meaning under IFRS. Management uses this measure to better understand the price realized in each reporting period for gold and silver sales. Average realized price is calculated on revenue and ounces sold to all customers, except Franco-Nevada, as gold ounces sold to Franco-Nevada is recognized in revenue at 20 percent of the prevailing gold spot price on the date of delivery and 80 percent at $1,250 per ounce. The average realized price is intended to provide additional information only and does not have any standardized definition under IFRS; it should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate this measure differently.
EBITDA is a non-IFRS financial measure, which excludes income tax and related expenses, finance costs (including accretion expense), interest income and depreciation and amortization from net (loss)/profit for the year. In 2019, Teranga amended the definition of EBITDA to exclude accretion expense to improve comparability of this non-IFRS financial measure with its peers. The comparative 2018 EBITDA has been restated to conform to the new presentation. EBITDA is intended to provide additional information to investors and analysts and do not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Management believes that EBITDA is a valuable indicator of our ability to generate liquidity by producing operating cash flow to: fund working capital needs, service debt obligations and fund capital expenditures.
Beginning second quarter 2019, the Company adopted adjusted EBITDA as a new non-IFRS financial measure. Management believes that adjusted EBITDA is a valuable indicator of our ability to generate liquidity by producing operating cash flow to: fund working capital needs, service debt obligations and fund capital expenditures, after adjusting for factors not reflective of the underlying performance of the Company. Adjusted EBITDA is intended to provide additional information to investors and analysts and does not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Company calculates adjusted EBITDA as EBITDA adjusted to exclude unrealized and realized foreign exchange gains and losses, gains and losses on derivative instruments, non-cash fair value changes, impairment provisions and reversals thereof, and other unusual or non-recurring items.
“Free cash flow” is a non-IFRS financial measure. The Company calculates free cash flow as net cash flow provided by operating activities less sustaining capital expenditures. The Company believes this to be a useful indicator of our ability to generate cash for growth initiatives. Other companies may calculate this measure differently.
"Adjusted net (loss)/profit attributable to shareholders” and “adjusted basic (loss)/earnings per share” are financial measures with no standard meaning under IFRS. These non-IFRS financial measures are used by management and investors to measure the underlying operating performance of the Company. Presenting these measures from period to period is expected to help management and investors evaluate earnings trends more readily in comparison with results from prior periods.
The Company calculates “adjusted net (loss)/profit attributable to shareholders” as net (loss)/profit for the year attributable to shareholders adjusted to exclude specific items that are significant, but not reflective of the underlying operations of the Company, including: the impact of unrealized and realized foreign exchange gains and losses, gains and losses on derivative instruments, accretion expense on long-term obligations, the impact of foreign exchange movements on deferred taxes, non-cash fair value changes, impairment provisions and reversals thereof, and other unusual or non-recurring items.
“Adjusted basic (loss)/earnings per share” is calculated using the weighted average number of shares outstanding under the basic method of earnings per share as determined under IFRS.
RECONCILIATION OF NON-IFRS MEASURES
The reconciliation cash costs per ounce, cost of sales per ounce, all-in sustaining costs per ounce, and all-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs) per ounce follows in the tables at the link: http://ml.globenewswire.com/Resource/Download/40c7606a-f894-4cb0-a102-ecdd85c3b268
Free cash flow is a non-IFRS performance measure that does not have a standard meaning under IFRS. Teranga defines free cash flow net cash flow provided by operating activities less sustaining capital expenditures.
EBITDA and adjusted EBITDA are calculated as follows:
Adjusted EBITDA & Profit
(Unaudited)
Three months ended December 31,
Twelve months ended December 31,
(US$000s)
2019
2018
2019
2018
Net (loss)/profit for the period
(12,023
)
(10,248
)
(29,952
)
13,465
Add: finance costs
7,060
3,772
21,072
15,783
Less: finance income
(7
)
(38
)
(101
)
(74
)
Add: income tax expense
5,028
4,140
25,317
23,312
Add: other tax expenses
-
-
5,632
-
Add: depreciation and amortization
24,110
16,962
82,631
69,092
Earnings before interest, taxes, depreciation and amortization
24,168
14,588
104,599
121,578
Adjustments for:
Add: Losses/(gains) on derivative instruments
2,561
7,149
16,365
(9,299
)
Add: Net foreign exchange losses/(gains)
2,217
(262
)
3,517
2,680
Add: Change in fair value of share warrant liabilities
4,336
137
5,759
(1,136
)
Add: Change in fair value of gold offtake payment liability
1,452
236
2,177
(317
)
Less: Re-measurement of contingent consideration
(2,242
)
-
(2,242
)
-
Adjusted Earnings before interest, taxes, depreciation and amortization
32,492
21,848
130,175
113,506
Adjusted net (loss)/profit attributable to shareholders and adjusted basic (loss)/earnings per share are calculated as follows:
(Unaudited)
Three months ended December 31,
Twelve months ended December 31,
(US$000s)
2019
2018
2019
2018
Net (loss)/profit for the year attributable to shareholders
(13,371
)
(10,639
)
(33,393
)
11,794
Adjustments (net of tax) for:
Losses/(gains) on derivative instruments
2,561
7,149
16,365
(9,299
)
Accretion expense
809
2,077
8,071
9,646
Net foreign exchange losses
1,661
422
2,757
3,008
Impact of foreign exchange on deferred taxes
(1,719
)
1,847
1,444
4,379
Change in fair value of share warrant liabilities
4,336
137
5,759
(1,136
)
Change in fair value of gold offtake payment liability
1,452
236
2,177
(317
)
Re-measurement of contingent consideration
(2,018
)
-
(2,018
)
-
Adjusted net (loss)/profit attributable to shareholders
(6,289
)
1,229
1,162
18,075
Basic (loss)/earnings per share
(0.12
)
(0.10
)
(0.31
)
0.11
Adjusted basic (loss)/earnings per share
(0.06
)
0.01
0.01
0.17
(2) During the three months ended December 31, 2019, gold ounces produced from Sabodala and Wahgnion were 54,539 ounces and 36,872 ounces, respectively, including 8,344 ounces produced during Wahgnion's pre-commercial production phase (2018: 59,442 ounces and nil, respectively). During the twelve months ended December 31, 2019, gold ounces produced from Sabodala and Wahgnion were 241,276 ounces and 47,492 ounces, respectively, including 18,964 ounces produced during Wahgnion's pre-commercial production phase (2018: 245,230 ounces and nil, respectively).
(3) Excludes 8,136 ounces and 10,725 ounces sold from Wahgnion's pre-commercial production phase for the three and twelve months ended December 31, 2019.
(4) Comparative amounts have been restated to present resettlement capital expenditures related to the Niakafiri deposit as growth capital expenditures.
(5) Average realized price and cost information only include results from the period after achieving commercial production at Wahgnion (November 1, 2019 to December 31, 2019).
(6) Excludes 8,344 ounces and 18,964 ounces produced during Wahgnion’s pre-commercial production phase for the three and twelve months ended December 31, 2019.
(7) Includes 5,660 ounces of gold produced during Wahgnion’s pre-commercial production period.
FORWARD-LOOKING STATEMENTS
This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"), which reflects management's expectations regarding Teranga’s future growth opportunities, results of operations, performance (both operational and financial) and business prospects (including the timing and development of new deposits and the success of exploration activities) and other opportunities. Wherever possible, words such as "plans", "expects", "does not expect", "scheduled", "trends", "indications", "potential", "estimates", "predicts", "anticipate", “to establish”, "does not anticipate", "believe", "intend", "ability to" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might", "will", or are "likely" to be taken, occur or be achieved, have been used to identify such forward looking information. Specific forward-looking statements in this press release include, but are not limited to, forecasting consolidated gold production for 2020, cost guidance and the timing of closing of the Massawa acquisition and the preparation and filing of applicable technical reports in connection therewith. Although the forward-looking information contained in this press release reflect management's current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, Teranga cannot be certain that actual results will be consistent with such forward-looking information. Such forward-looking statements are based upon assumptions, opinions and analysis made by management in light of its experience, current conditions and its expectations of future developments that management believe to be reasonable and relevant but that may prove to be incorrect. These assumptions include, among other things, the closing and timing of financing, the ability to obtain any requisite governmental approvals, the accuracy of mineral reserve and mineral resource estimates, gold price, exchange rates, fuel and energy costs, future economic conditions, anticipated future estimates of free cash flow, and courses of action. Teranga cautions you not to place undue reliance upon any such forward-looking statements.
The risks and uncertainties that may affect forward-looking statements include, among others: the inherent risks involved in exploration and development of mineral properties, including government approvals and permitting, changes in economic conditions, changes in the worldwide price of gold and other key inputs, changes in mine plans and other factors, such as project execution delays, many of which are beyond the control of Teranga, as well as other risks and uncertainties which are more fully described in Teranga's amended and restated Annual Information Form dated July 31, 2019, and in other filings of Teranga with securities and regulatory authorities which are available on SEDAR at www.sedar.com. Teranga does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change. Nothing in this document should be construed as either an offer to sell or a solicitation to buy or sell Teranga securities. All references to Teranga include its subsidiaries unless the context requires otherwise.
ABOUT TERANGA
Teranga is a multi-jurisdictional West African gold company focused on production and development as well as the exploration of approximately 5,500 km2 of land located on prospective gold belts. Since its initial public offering in 2010, Teranga has produced more than 2 million ounces of gold at its Sabodala operation in Senegal. Focused on diversification and growth towards its vision of becoming a mid-tier producer, the Company recently announced commercial production at its second gold mine, Wahgnion, which is located in Burkina Faso, and is carrying out exploration programs in three West African countries: Burkina Faso, Côte d’Ivoire and Senegal. Teranga applies a rigorous capital allocation framework for its investment decisions.
Steadfast in its commitment to set the benchmark for responsible mining, Teranga operates in accordance with international standards and aims to act as a catalyst for sustainable economic, environmental, and community development as it strives to create value for all of its stakeholders. Teranga is a participant of the United Nations Global Compact and a leading member of the multi-stakeholder group responsible for the submission of the first Senegalese Extractive Industries Transparency Initiative revenue report.
