(All amounts are in U.S. dollars unless
otherwise stated)
Teranga Gold Corporation ("Teranga" or the "Company") (TSX:TGZ)
today reported its financial and operating results for the third
quarter ended September 30, 2017.
“It was an extremely busy quarter,” said Richard
Young, President and Chief Executive Officer. “Operationally, it
was solid keeping us on track to meet our annual production and
cost guidance for 2017.”
Added Mr. Young, “During the third quarter we
filed two technical reports. The first was for our flagship
Sabodala mine and the second was for our new development project
Banfora, which together resulted in a 70 percent increase in proven
and probable reserves to 3.9 million ounces. Combined with
high-grade results at our most exciting exploration project, Golden
Hill, we are laying the foundation for the next multi-asset,
mid-tier gold miner in West Africa.”
“The Banfora Project is advancing on all fronts.
In the coming weeks, we expect to mandate a lender for the Banfora
project financing and to award the EPCM contract,” stated Paul
Chawrun, Chief Operating Officer. “The owner’s team is being
assembled and project civils and site infrastructure are scheduled
to begin in the fourth quarter. Additionally, the 75,000-metre
infill drilling program upgrading inferred resources is expected to
be completed shortly with a reserve update anticipated in the
first half of 2018.”
Third Quarter 2017
Highlights
- Solid third quarter puts the Company on track to achieve 2017
guidance, specifically the upper end of production, lower end of
per tonne costs, and the upper end of its all-in sustaining costs
and all-in sustaining costs (excluding non-cash inventory movements
and amortized advanced royalty costs) per ounce1 cost metrics.
- Increased the Company’s mineral reserves to 3.9 million ounces
(mineral reserve estimates are as at June 30, 2017)
- Added 400,000 ounces to Sabodala’s reserve base, bringing total
reserves to 2.7 million ounces and improving the five-year
production and free cash flow profile2
- Announced initial reserves for the Banfora Project in Burkina
Faso of 1.2 million ounces.
- Completed positive Banfora feasibility study, establishing
solid base case economics and outlining a path forward to reserve
growth, financing and construction.
- Following two high-grade discoveries announced in April at the
Company’s Golden Hill property in Burkina Faso, early-stage
drilling continues to yield high-grade, near-surface and
continuation at depth of gold mineralization drill results.
Financial
Summary |
|
|
|
|
|
Three months ended September 30, |
Nine months ended September 30, |
Financial Data |
|
2017 |
|
2016 |
|
% Change |
2017 |
|
2016 |
|
% Change |
Revenue |
($000's) |
61,041 |
|
60,316 |
|
1 |
% |
203,403 |
|
213,076 |
|
(5 |
%) |
Cost of
sales |
($000's) |
(49,225 |
) |
(37,748 |
) |
30 |
% |
(157,964 |
) |
(138,506 |
) |
14 |
% |
Profit
attributable to shareholders of Teranga |
($000's) |
10,370 |
|
10,437 |
|
(1 |
%) |
26,173 |
|
24,395 |
|
7 |
% |
Per share1 |
($) |
0.10 |
|
0.13 |
|
(26 |
%) |
0.24 |
|
0.31 |
|
(21 |
%) |
EBITDA2 |
($000's) |
23,004 |
|
26,841 |
|
(14 |
%) |
68,705 |
|
82,502 |
|
(17 |
%) |
Operating cash flow excluding changes in working capital other than
inventories |
($000's) |
11,884 |
|
7,970 |
|
49 |
% |
57,902 |
|
52,049 |
|
11 |
% |
Operating cash flow |
($000's) |
10,235 |
|
13,255 |
|
(23 |
%) |
38,927 |
|
58,356 |
|
(33 |
%) |
Sustaining capital expenditures (before deferred stripping) |
($000's) |
6,469 |
|
6,426 |
|
1 |
% |
21,398 |
|
25,481 |
|
(16 |
%) |
Capitalized deferred stripping – sustaining |
($000's) |
5,469 |
|
3,065 |
|
78 |
% |
21,773 |
|
13,669 |
|
59 |
% |
Growth
capital expenditures |
($000's) |
4,984 |
|
- |
|
N/A |
14,113 |
|
- |
|
N/A |
1 On May 8, 2017, the Company completed a
five-for-one consolidation of the common shares of the Company.
2 This is a non-IFRS financial measure and
does not have a standard meaning under IFRS. Please see the
Non-IFRS Performance Measures section in Management’s Discussion
& Analysis for the three and nine months ended September 30,
2017 available on the Company’s website at www.terangagold.com.
- Net income attributable to shareholders was $10.4 million for
the quarter, unchanged from the prior year period, and increased by
7% to $26.2 million year-to-date. Higher non-cash inventory
costs during the quarter and year-to-date were offset by lower
income taxes and hedge gains in 2017 compared to hedge losses in
the 2016 year-to-date period.
- Earnings per share of $0.10 and $0.24 for the three and
nine-month periods, respectively, were negatively impacted by a
year-over-year increase in the number of shares related to the
acquisition of Gryphon Minerals in October 2016 and the equity
offering relating to construction readiness activities for the
Banfora Project (previously owned by Gryphon) in November
2016.
- Cash flow related to operating activities, before changes in
working capital excluding inventories, increased year-over-year to
$11.9 million and $57.9 million, respectively, for both the quarter
and year-to-date periods. Due to an increase in working
capital related to payments of higher royalties and 2016 income tax
(paid in arrears) in 2017, net cash provided by operating
activities decreased year-over-year to $10.2 million and $38.9
million, respectively, for both the quarter and year-to-date
periods.
- EBITDA1 for the three and nine-month periods was $23.0
million and $68.7 million, respectively. Inventory movements
related to non-cash historic mining costs relating to the drawdown
of the Company’s low-grade stockpiles negatively impacted
year-over-year EBITDA by $8.4 million in the quarter and $17.3
million on a year-to-date basis. The volatility in inventory
movement does not affect cash flow from operations.
Review of
Operating Highlights |
|
|
|
|
|
Three months ended September 30, |
Nine months ended September 30, |
Operating Results |
|
2017 |
2016 |
% Change |
2017 |
2016 |
% Change |
Ore mined |
(‘000t) |
540 |
331 |
63 |
% |
1,389 |
1,599 |
(13 |
%) |
Waste mined - operating |
(‘000t) |
6,425 |
6,373 |
1 |
% |
17,470 |
19,680 |
(11 |
%) |
Waste mined - capitalized |
(‘000t) |
1,924 |
1,189 |
62 |
% |
8,331 |
4,637 |
80 |
% |
Total mined |
(‘000t) |
8,889 |
7,893 |
13 |
% |
27,190 |
25,916 |
5 |
% |
Grade mined |
(g/t) |
2.49 |
2.71 |
(8 |
%) |
3.17 |
2.58 |
23 |
% |
Ounces mined |
(oz) |
43,286 |
28,826 |
50 |
% |
141,398 |
132,911 |
6 |
% |
Strip ratio |
(waste/ore) |
15.5 |
22.9 |
(33 |
%) |
18.6 |
15.2 |
22 |
% |
Ore milled |
(‘000t) |
1,051 |
933 |
13 |
% |
3,145 |
2,991 |
5 |
% |
Head grade |
(g/t) |
1.66 |
1.78 |
(7 |
%) |
1.78 |
1.93 |
(8 |
%) |
Recovery rate |
(%) |
90.5 |
92.6 |
(2 |
%) |
91.6 |
92.9 |
(1 |
%) |
Gold produced1 |
(oz) |
50,873 |
49,481 |
3 |
% |
165,333 |
172,748 |
(4 |
%) |
Gold sold |
(oz) |
47,695 |
45,161 |
6 |
% |
162,134 |
171,129 |
(5 |
%) |
|
|
|
|
|
|
|
|
Average realized price2 |
($/oz) |
1,277 |
1,333 |
(4 |
%) |
1,253 |
1,244 |
1 |
% |
Cost of sales per ounce |
($/oz sold) |
1,032 |
836 |
23 |
% |
974 |
809 |
20 |
% |
Total cash costs2 |
($/oz sold) |
782 |
620 |
26 |
% |
735 |
600 |
23 |
% |
All-in sustaining costs2 |
($/oz sold) |
1,092 |
910 |
20 |
% |
1,061 |
897 |
18 |
% |
All-in sustaining costs (excluding cash / (non- cash)
inventory movements and amortized advanced royalty costs)2 |
($/oz sold) |
1,084 |
1,091 |
(1 |
%) |
978 |
919 |
6 |
% |
|
|
|
|
|
|
|
|
Mining |
($/t mined) |
2.46 |
2.59 |
(5 |
%) |
2.31 |
2.32 |
0 |
% |
Mining long haul |
($/t hauled) |
2.96 |
2.79 |
6 |
% |
2.90 |
3.72 |
(22 |
%) |
Milling |
($/t milled) |
10.46 |
11.05 |
(5 |
%) |
11.34 |
10.75 |
5 |
% |
G&A |
($/t milled) |
4.16 |
4.55 |
(9 |
%) |
4.11 |
4.41 |
(7 |
%) |
|
|
|
|
|
|
|
|
1 Gold produced represents change in gold
in circuit inventory plus gold recovered during the period.
2 Average realized price, 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 non-IFRS financial
measures that do not have a standard meaning under IFRS.
Please refer to Non-IFRS Performance Measures in the Company's
Third Quarter 2017 Management's Discussion and Analysis.
- Third quarter gold production of 50,873 ounces was 3 percent
higher than the prior year quarter, with 165,333 ounces of gold
produced year-to-date.
- Per tonne costs for the third quarter were within or below the
low end of guidance ranges, keeping the Company on track to meet
the lower end of per tonne cost guidance for 2017.
- Third quarter per ounce costs, including cost of sales, total
cash costs1, all-in sustaining costs1 and all-in sustaining costs
(excluding non-cash inventory movements and amortized advanced
royalty costs)1 were above the full year guidance ranges due to
increased costs relating to more material mined and processed,
lower grades processed, and the timing of gold sales during the
quarter. With mining activities focused on the high-grade Gora and
Golouma deposits for the remainder of the year, the Company expects
to achieve the higher end of its 2017 all-in sustaining1 and all-in
sustaining (excluding non-cash inventory movements and amortized
advanced royalty costs)1 per ounce guidance ranges.
Liquidity Summary
Cash and cash equivalents totalled $73.0
million, down from the second quarter mainly due to $5.0 million in
growth capital expenditures relating to the Banfora Project and a
$1.5 million increase in working capital.
Available for sale securities were valued at
$3.8 million at September 30, 2017. Available for sale
securities are liquid and freely trading securities listed on
public stock exchanges and can be sold at the Company’s
discretion.
Banfora Project Update
During the third quarter, the Company announced
a positive feasibility study with a base case internal rate of
return of 15%. Since then, the Banfora Project is advancing
on all fronts with the assembly of the owner’s team, project civils
and site infrastructure scheduled to begin in the fourth quarter.
By the end of November, the Company expects to award the EPCM
contract and complete a 75,000-metre infill drill program to
upgrade inferred resources. Overall, the Company anticipates
achieving a conversion rate of between 25% and 50% of the inferred
resources. A reserve update is expected in the first half of
2018.
Through a combination of cash on hand,
marketable securities, cash flow from operations and a debt
facility of $150 million, the Company believes it is in a strong
position to fund Banfora. To provide greater cash flow certainty,
the Company hedged half of the production at its Sabodala mine in
Senegal for the next 15 months at $1,336 per ounce. Teranga
expects to sign a mandate letter for a $150 million senior project
debt facility with a leading financier in November. The
financing, which is subject to due diligence, is targeted to close
in the second quarter of 2018.
Exploration Budget Update
As a result of the positive drill results at
Golden Hill, Banfora and Sabodala, the Company’s exploration and
reserve development budget has been increased to between $20 and
$25 million from $12 to $15 million initially at the start of
2017. More than 90% of this year’s spending is on defining
initial resources and converting existing resources to
reserves.
Consolidated Financial
Statements
For additional details, please refer to
Teranga’s interim condensed consolidated financial statements and
management’s discussion & analysis for the three and nine
months ended September 30, 2017. These documents are
available on the Company’s website at www.terangagold.com, SEDAR at
www.sedar.com/terangagold.
Q3 2017 Conference Call &
Webcast
Teranga will host a conference call/audio
webcast today at 8:30 a.m. ET, during which management will review
the quarter’s highlights. Those wishing to listen can access
the live conference call and webcast as follows:
Date & Time: |
Thursday, November 2, 2017 at 8:30 a.m. ET |
Telephone: |
(647) 788-4919 (local or international)(877) 291-4570
(toll-free)Please allow 10 minutes to be connected to the
conference call |
Webcast: |
www.terangagold.com/q32017 |
Replay: |
The conference call replay will be available for two weeks after
the call by dialing: (416) 621-4642 or toll-free at (800) 585-8367
and entering the conference ID 83891790. |
Note: |
The slide presentation will be available for download at
www.terangagold.com for simultaneous viewing during the conference
call |
Endnotes
(1) Total
cash costs per ounce, earnings before interest, taxes, depreciation
and amortization (“EBITDA”), and average realized gold price are
non-IFRS financial measures and do not have standard meanings under
IFRS. All-in sustaining costs and all-in sustaining costs
(excluding non-cash inventory movements and amortized advanced
royalty costs) per ounce are non-IFRS financial measures. The
comparable IFRS measure is cost of sales per ounce, which for 2017,
is expected in the range of $950 - $1,025 per ounce. Please
see the Non-IFRS Performance Measures section in Management’s
Discussion & Analysis for the three and nine months ended
September 30, 2017 available on the Company’s website at
www.terangagold.com.
(2) The
production and free cash flow targets are based on proven and
probable reserves only from the Sabodala project as at June 30,
2017 as disclosed on the Company’s website at www.terangagold.com
and on SEDAR at www.sedar.com. The estimated ore reserves
underpinning this production target have been prepared by a
qualified person or persons (see Qualified Persons Statements in
the Company’s Management’s Discussion & Analysis for the three
and nine months ended September 30, 2017 available on the Company’s
website at www.terangagold.com).
Qualified Persons Statement
The technical information contained in this
press release relating to the Sabodala open pit mineral reserve
estimates is based on, and fairly represents, information compiled
by Mr. Stephen Ling, P. Eng who is a member of the Professional
Engineers Ontario. Mr. Ling is a full time employee of Teranga and
is not "independent" within the meaning of NI 43-101. Mr.
Ling has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a "Qualified Person"
under NI 43-101 Standards of Disclosure for Mineral
Projects.
The technical information contained in this
press release relating to Sabodala mineral resource estimates is
based on, and fairly represents, information compiled by Ms. Patti
Nakai-Lajoie. Ms. Nakai-Lajoie, P. Geo., is a Member of the
Association of Professional Geoscientists of Ontario. Ms.
Nakai-Lajoie is a full time employee of Teranga and is not
"independent" within the meaning of NI 43-101. Ms. Nakai-Lajoie has
sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which she is undertaking to qualify as a "Qualified
Person" under NI 43-101 Standards of Disclosure for Mineral
Projects.
The technical information contained in this
press release relating to the Sabodala underground ore reserves
estimates is based on, and fairly represents, information compiled
by Jeff Sepp, P. Eng., of Roscoe Postle Associates Inc. (RPA), who
is a member of the Professional Engineers Ontario. Mr. Sepp
is “independent” within the meaning of NI 43-101. Mr. Sepp has
sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity he is undertaking to qualify as a “Qualified Person” under
NI 43-101 Standards of Disclosure for Mineral Projects.
The technical information contained in this
press release relating to the Banfora open pit mineral reserve
estimates is based on, and fairly represents, information compiled
by Mr. Glen Ehasoo, P. Eng., of RPA, who is a member of the
Association of Professional Engineers and Geoscientists of British
Columbia. Mr. Ehasoo is "independent" within the meaning of NI
43-101. Mr. Ehasoo has sufficient experience which is
relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to
qualify as a “Qualified Person” under NI 43-101 Standards of
Disclosure for Mineral Projects.
The technical information contained in this
press release relating to Banfora mineral resource estimates is
based on, and fairly represents, information compiled by Mr. David
Ross, P.Geo., of RPA, who is a Member of the Association of
Professional Geoscientists of Ontario. Mr. Ross is "independent"
within the meaning of NI 43-101. Mr. Ross has sufficient experience
which is relevant to the style of mineralisation and type of
deposit under consideration and to the activity which he is
undertaking to qualify as a “Qualified Person” under NI 43-101
Standards of Disclosure for Mineral Projects.
Teranga's disclosure of mineral reserve and
mineral resource information is governed by NI 43-101 under the
guidelines set out in the Canadian Institute of Mining, Metallurgy
and Petroleum (the "CIM") Standards on Mineral Resources and
Mineral Reserves, adopted by the CIM Council, as may be amended
from time to time by the CIM ("CIM Standards"). There can be no
assurance that those portions of mineral resources that are not
mineral reserves will ultimately be converted into mineral
reserves.
Teranga confirms that it is not aware of any new
information or data that materially affects the information
included in the Technical Report or third quarter 2017 results,
market announcements and, in the case of estimates of Mineral
Resources, that all material assumptions and technical parameters
underpinning the estimates in the relevant market announcement
continue to apply and have not materially changed. The
Company confirms that the form and context in which the Qualified
Person’s findings are presented have not been materially modified
from the original market announcement.
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, results of operations (including, without limitation,
future production and capital expenditures), performance (both
operational and financial) and business prospects (including the
timing and development of new deposits and the success of
exploration activities) and opportunities. Wherever possible, words
such as “potential”, “belief”, “believe”, “expects”, “estimates”,
“plans”, “anticipated”, “ability”, “intended to”, “expected to”,
“objective to” and similar expressions or statements that certain
actions, events or results “should”, or "will" have been used to
identify such forward looking information. Forward-looking
statements include, without limitation, all disclosure regarding
possible events, conditions or results of operations, future
economic conditions and anticipated courses of action. Although the
forward-looking statements 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 statements.
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 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, the ability to resettle the
community within anticipated timeline, 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 Annual Information Form
dated March 29, 2017, and in other filings of Teranga with
securities and regulatory authorities which are available
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 report 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 more than 5,000km2 of land located on prospective
gold belts. Since its initial public offering in 2010,
Teranga has produced more than 1.3 million ounces of gold from its
operations in Senegal. Focused on diversification and growth,
the Company is advancing its Banfora development project, and is
conducting extensive exploration programs in three countries:
Burkina Faso, Senegal and Côte d’Ivoire. As at June 30, 2017,
Teranga has reserve base of nearly 4.0 million ounces of gold, a
strong balance sheet and the financial flexibility to grow its
business.
Steadfast in its commitment to set the benchmark
for responsible mining, Teranga operates in accordance with the
highest 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 member 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. The Company's
responsibility report is prepared in accordance with its
commitments under the United Nations Global Compact and in
alignment with the Global Reporting Initiative
guidelines.
Contact
Information |
|
Richard Young |
Trish Moran |
President &
CEO |
Head of Investor
Relations |
T: +1 416-594-0000 | E:
ryoung@terangagold.com |
T: +1
416-607-4507 | E: tmoran@terangagold.com |