21 July 2017
Results for the six months ended 30 June
2017 (Unaudited)
Based on IFRS and expressed in US
Dollars (US$)
Acacia Mining plc (“Acacia’’) reports 2017 interim results
“The first half has posed significant challenges to our
operations in Tanzania following
the introduction of the concentrate export ban in March and I am
pleased with how we have performed in light of this”, said
Brad Gordon, Chief Executive Officer
of Acacia Mining. “It is a complex and fluid situation which has
led to a significant reduction in our cash balance to US$176 million from US$318
million, as a result of being unable to realise US$175 million of revenue during the half
together with a US$51 million VAT
outflow. We continue to take steps to preserve long-term
shareholder value and have served Arbitration notices for our
Bulyanhulu and Buzwagi mines and will work to achieve a negotiated
resolution, which is the preferable outcome for all parties. In
spite of the challenges we faced, we delivered the highest H1
production in the history of the Company, with gold production of
428,203 ounces. AISC for the first six months was US$893 per ounce sold, 5% lower than H1 2016, and
if we had been able to sell all of the concentrate produced, AISC
would have been approximately US$800
per ounce. As a result of the impact of the ban we are now
targeting the lower end of the production guidance range of
850-900,000 ounces for 2017, but due to strong cost discipline we
are leaving AISC guidance unchanged.”
Operational Highlights
- H1 Total Recordable Injury Frequency Rate (TRIFR) of 0.40, 49%
lower than H1 2016
- H1 gold production of 428,203 ounces, 4% higher than H1 2016,
with gold sales of 312,438 ounces
- H1 AISC1 of US$893 per
ounce sold, 5% below H1 2016 and H1 cash costs1 of
US$577/oz sold,10% lower than H1 2016
- H1 AISC, assuming sales matched production, would have been
US$800/oz, which includes a
US$18/oz share based payment
revaluation credit resulting from the fall in the share price year
to date
- Q2 gold production of 208,533 ounces, 6% lower than Q2
2016
- Q2 gold sales of 127,694 ounces, which includes a reversal of
advanced sales of 18,204 ounces of concentrate from Q1 2017
- Q2 AISC1 of US$835/oz
sold, 10% below Q2 2016 and Q2 cash costs1 of
US$577/oz sold, 3% lower than Q2
2016
Financial Highlights
- Financial performance was significantly impacted by the ongoing
ban on exporting concentrate which resulted in approximately
US$175m of lost revenue in the
period
- H1 Revenue of US$391.7 million,
22% lower than H1 2016
- H1 EBITDA1 of US$161.4
million, 13% down from H1 2016
- H1 Net earnings of US$62.5
million, equating to US15.3 cents per share
- Cash on hand of US$175.9 million
as at 30 June 2017, with net cash of
US$90.7 million
- As a result of the negative cash flow, no interim dividend has
been declared, in-line with the cash flow based dividend
policy
|
Three months ended 30 June |
Six months ended 30 June |
(Unaudited) |
2017 |
2016 |
2017 |
2016 |
Gold
production (ounces) |
208,533 |
221,815 |
428,203 |
412,025 |
Gold
sold (ounces) |
127,694 |
216,782 |
312,438 |
400,963 |
Cash
cost (US$/ounce)1 |
577 |
595 |
577 |
640 |
AISC
(US$/ounce)1 |
835 |
926 |
893 |
941 |
Net
average realised gold price (US$/ounce)1 |
1,255 |
1,258 |
1,235 |
1,209 |
(in
US$'000) |
|
|
|
|
Revenue |
157,763 |
284,038 |
391,664 |
504,947 |
EBITDA
1 |
79,222 |
119,332 |
161,415 |
184,882 |
Adjusted EBITDA1 |
83,199 |
114,088 |
166,219 |
180,499 |
Net
earnings/(loss) |
35,716 |
46,282 |
62,543 |
(6,128) |
Basic
earnings/(loss) per share (EPS) (cents) |
8.7 |
11.3 |
15.3 |
(1.5) |
Adjusted net earnings1 |
38,500 |
40,659 |
65,906 |
58,767 |
Adjusted net earnings per share (AEPS) (cents)1 |
9.4 |
9.9 |
16.1 |
14.3 |
Cash
generated from operating activities |
(23,909) |
104,864 |
1,315 |
157,096 |
Capital expenditure2 |
45,628 |
49,142 |
92,456 |
85,172 |
Cash
balance |
175,886 |
284,357 |
175,886 |
284,357 |
Total
borrowings |
85,200 |
113,600 |
85,200 |
113,600 |
1 These are non-IFRS measures.
Refer to page 28 for definitions 2 Excludes
non-cash capital adjustments (reclamation asset adjustments) and
include finance lease purchases and land purchases recognised as
long term prepayments
Other Developments
Export of metallic mineral concentrates
As previously announced, 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 in
order to promote the creation of a domestic smelting industry.
Following the directive we ceased all exports of our gold/copper
concentrate (“concentrate”) including the 277 containers that had
been approved for export prior to the ban which are located in Dar
es Salaam at both the port and a staging warehouse.
The prevention of exports impacts
Bulyanhulu and Buzwagi which produce gold in both doré and in
concentrate form due to the mineralogy of the ore. North Mara is
unaffected due to 100% of its production being doré. In the first
half of 2017, concentrate accounted for 36% of group level
production, with 64% of Buzwagi production and 46% of Bulyanhulu
production respectively being concentrate.
Acacia has been exporting concentrate
from Bulyanhulu since 2001 and from Buzwagi since 2010 and has
fully declared all associated gold, copper and silver revenue.
Whilst the proportion of gold in the concentrate is less than 0.02%
it represents approximately 90% of the value of the concentrate,
with copper representing approximately 10% of the value and silver
less than 1%. Bulyanhulu and Buzwagi are permitted under their
agreements signed with the Government of Tanzania to sell their concentrate products to
overseas customers and to export the concentrate in containers, and
have been in full compliance with these laws and their export
permits.
During the second quarter two Presidential Committees announced
their findings following investigations into the technical and
economic aspects of the historic exports of gold/copper
concentrates. Acacia fully refutes the implausible findings of both
committees, which claim that Acacia and its predecessor companies
have historically significantly under-declared the contents of
exports of concentrate which has led to an under-declaration of
taxes of tens of billions of dollars. Following the Committees’
announcements, the Government commenced various investigations into
the allegations of undeclared revenue and unpaid taxes. Acacia is
fully co-operating with these investigations and has provided
extensive documentation and information to the investigating
authorities. In addition, employees in Tanzania have been and continue to be
interviewed by Government agencies as part of this process. Acacia
re-iterates 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. In addition, Acacia’s consolidated accounts and each
local company’s accounts are annually audited to an international
standard in accordance with IFRS. Acacia has requested copies of
the two Presidential Committees’ reports and called for independent
verification of the reported results, but to date has not received
a response.
As reported at the end of Q1 2017, included in the concentrate
shipments retained in Dar es Salaam were approximately 18,200
ounces of gold for which we received advance payment. As mentioned,
there was the possibility that the advanced payment would have to
be refunded as these shipments did not leave Tanzania within the contractual period. During
Q2 2017, we repaid approximately US$22
million, being the full advance payment received, and have
subsequently reversed the sale. Should the ban be lifted, these
ounces can be sold again immediately as all royalties have been
paid and export permits were previously granted.
We have continued to operate at Bulyanhulu and Buzwagi during
the first half and continue to stockpile concentrate at each of the
sites. This has resulted in the build-up of approximately 127,000
ounces of gold contained in unsold concentrate. In addition, we
have approximately 8.3 million pounds of copper and 107,000 ounces
of silver contained in the unsold concentrate. If the concentrate
had been sold, net revenue and cashflow would have increased by
approximately US$163 million. AISC
was impacted on a unit cost basis by the concentrate ban, and had
we sold all of the ounces produced, AISC for the half year would
have been approximately US$800 per
ounce, and before the impact of the share based payment revaluation
credit would have been approximately US$818 per ounce.
In June, the Government of Tanzania and Barrick Gold Corporation
(“Barrick”) agreed to commence discussions with the aim of
resolving the current situation. Whilst these discussions are yet
to commence, we understand that they will do so in the near future
and that both sides will seek to achieve a timely resolution to the
dispute. At this stage, Acacia is not participating directly in the
discussions. Any potential resolution that might be identified as a
result of the discussions will be subject to approval by Acacia,
and the Company is working with Barrick to support such
discussions.
Acacia’s preferred outcome remains for a negotiated settlement
with the Government, and whilst we see a route to achieving this we
believe that it makes sense to continue operations at all three of
our mines despite the losses we are incurring, predominantly at
Bulyanhulu. However, given the scale of the cash outflows at
Bulyanhulu we do not believe that this situation is sustainable at
that operation beyond the end of the current quarter. In the event
a decision was made to move Bulyanhulu to temporary care and
maintenance, Acacia estimates that it would incur approximately
US$30 million of upfront costs to
retrench employees and end contracts in addition to the natural
unwinding of around two months’ worth of accounts payable with
minimal gold production over the same period. Going forward,
monthly costs of US$2-3 million would
be incurred to maintain the mine in good standing ahead of a future
re-start, when the mine would then benefit from the initial
build-up of accounts payable.
Update on legislative changes in Tanzania
On 29th June, three new Parliamentary bills, which recommended
significant changes to the legal and regulatory framework governing
the natural resources sector as a whole in Tanzania, were published under a certificate
of urgency which led to the extension of the Parliamentary session.
Post period end, these bills were enacted by the Tanzanian
Parliament and published in the Country’s official Government
Gazette of new legislation. All of the legislation is now in force
and some of the terms within the acts are being applied by
Tanzanian authorities.
The Natural Wealth and Resources (Permanent Sovereignty) Act, No
5 of 2017, the Natural Wealth and Resources Contracts (Review and
Re-Negotiation of Unconscionable Terms) Act, No 6 of 2017 and the
Written Laws (Miscellaneous Amendments) Act, No 7 of 2017, purport
to make a number of changes to the operating environment for
Tanzania’s extractive industries. These changes include, among
others:
- the right for the Government of Tanzania (GoT) to renegotiate existing mineral
development agreements at its discretion;
- the provision to the GoT of a non-dilutable, free-carried
interest of no less than 16% in all mining projects;
- the right for the GoT to acquire up to 50% of any mining asset
commensurate with the value of tax benefits provided to the owner
of that asset by the GoT;
- removal of the refund of input VAT incurred on production of
raw minerals for export;
- an increase in the rate of royalties from 4% to 6% on revenues
from gold, copper, silver and platinum group metals;
- requirements for local beneficiation and procurement;
- constraints on the use of off-shore bank accounts; and
- a GoT lien over materials extracted from mining
operations.
For a more detailed reading of the legislative provisions
included in the new laws, please see
http://www.parliament.go.tz/bills-list.
This legislation is in addition to the recent amendments
introduced to the Finance Act, which require mining companies to
pay a 1% clearance fee calculated by reference to the gross value
of minerals to the Government in order to obtain clearance for
export (“Clearing Fee”). It is Acacia’s belief that a number of the
changes contained within the laws will require supplementary
regulations over the coming months to set out the proposed
practical implementation of the new laws. At this stage, Acacia is
not aware of this process having commenced.
Acacia continues to monitor the impact of the new legislation in
light of its Mineral Development Agreements (“MDAs”) with the
Government of Tanzania. However,
to minimise further disruptions to our operations we will, in the
interim, satisfy the requirements imposed as regards the increased
royalty rate applicable to metallic minerals such as gold, copper
and silver of 6% (increased from 4%), in addition to the recently
imposed 1% clearing fee on exports. These payments are being made
under protest, without prejudice to our legal rights under the
MDAs.
Filing of Notice of Arbitration
Subsequent to period end Acacia announced that it served Notices
of Arbitration in Tanzania on
behalf of Bulyanhulu Gold Mine Limited (“BGML”), the owner of the
Bulyanhulu mine, and Pangea Minerals Limited (“PML”), the owner of
the Buzwagi mine. These Notices refer the current disputes between
the Government of Tanzania and
each of BGML and PML to arbitration. This is in accordance with the
dispute resolution processes agreed by the Government of
Tanzania in its MDAs with BGML and
PML.
The serving of the Notices was necessary to protect the Company,
and is currently with the Government to respond, but Acacia remains
of the view that a negotiated resolution is the preferred outcome
to the current disputes and the Company will continue to work to
achieve this.
Minimum local shareholding and listing requirements for mining
companies
During the latest Tanzanian Parliamentary session, the
legislation impacting the ability for foreign investors to buy
shares in initial public offers was amended, which significantly
broadens the potential investor base for future offerings. At this
stage, other than Acacia’s existing cross listing on the Dar es
Salaam Stock Exchange (“DSE”), no companies in either the Mining or
Telecommunications sectors have successfully completed a listing on
the DSE. Acacia supports the attempt to build capital markets in
Tanzania and the promotion of
local ownership and we have engaged with the Capital Markets and
Security Authority (CMSA), the DSE, the Ministry of Energy and
Minerals and all other relevant authorities in Tanzania with a view to finding a route
forward that is both beneficial and practical for all
stakeholders.
Contribution to Tanzania
In the first half of 2017, Acacia has paid a total of
US$53 million of taxes and royalties.
This is made up of provisional corporate tax payments year of
US$17.3 million, royalties of
US$18.6 million, payroll taxes of
US$11.5 million and other taxes of
US$5.6 million. In addition, we have
also paid US$10 million in tax
deposits which is recognised as part of other assets. If the
gold/copper concentrate produced since March was sold during the
first half then approximately a further US$7
million would have been paid in royalties. We have also paid
local service levies due on H2 2016 revenues of US$1.6 million during the first half and are due
to pay a further US$1.2 million in
July for H1 2017. These amounts are 300% higher than the
requirements set out in our MDAs. The provisional corporate tax
payments have been offset against the indirect tax receivable under
the existing Memorandum of Settlement (“MOS”) entered into with the
Tanzanian Government.
Over the last 6 months, Acacia’s Sustainable Communities (SC)
team continued to focus on delivering community benefits despite
the uncertainties in the operating environment. The focus for the
first half of the year was to begin and/or complete key
infrastructural projects which we had committed to the communities
and also to begin the roll out of the new SC strategy by building
some of the foundations for implementation.
By end of June 2017, through the
Maendeleo Fund, we implemented 6 social infrastructure projects
with a total value of approximately US$1
million at the 3 mines sites – some of which began at the
end of 2016. The key projects per site include:
- Bulyanhulu: Constructed additional classrooms at Lwabakanga
Primary School which has almost 600 students
- Buzwagi: Completed the construction of the 2.5km Mwime Chapulwa
gravel road to benefit the Mwendakulima, Mwime and Chapulwa
villages with a population of over 13,500 people.
- North Mara: Completion of the Kerende and Nyamwaga Health
Centres which will benefit a population of about 25,000 people in 6
villages.
An additional 10 infrastructural development projects are
currently underway across all our sites with a value of
US$940,000 which include school
infrastructure, water supply, sanitation and maintenance of
community roads. Other development projects in the last 6
months include continuing our support to 2,700 students with
uniforms and books under the CanEducate partnership; supporting
sports through coaching clinics in partnership with Sunderland
Football Club and provision of reconstructive surgery for 36 burns
and cleft lip and palate patients through our partnership with
Rafiki Medical Missions.
In addition, Acacia, in partnership with TANESCO, has invested
US$2.5 million to construct a STATCOM
centre at Bulyanhulu that will enhance the quality of power supply
in the area. The investment will greatly improve the stability of
the electricity at the Bulyanhulu and Buzwagi mines and will reduce
our reliance on self-generated diesel power. Residents in the
Shinyanga and Geita districts around the mines will also benefit
from improved quality power supply resulting from the commissioning
of the STATCOM in July 2017.
During the reporting period, we shared our SC strategy with some
of our key partners including government officials, development
partners and other interested parties to increase awareness of the
strategy. A database is under design to allow us to effectively
monitor and evaluate our development efforts and it is expected to
be completed in Q3 2017. Our future development projects will be
informed by research and a consulting firm has been contracted to
do an assessment of opportunities for development in the
agricultural and small business sectors around our mine sites.
Results from this study are expected in Q4 2017 and will be used to
plan 2018 development initiatives. This study is in addition to the
education scoping study which was completed in January 2017.
Indirect Taxation update
During the second quarter, Acacia incurred a further
US$23 million of VAT outflows and
received no VAT refunds, which together with the outflow in Q1 2017
has led to a total VAT outflow in the first half of 2017 of
US$51 million. The audit of all VAT
claims dating back to 2014 undertaken by the Tanzanian Revenue
Authority and the Ministry of Finance is ongoing, with the focus
now shifted to the suppliers to which our VAT claims relate, to
determine whether the corresponding output VAT on their side has
been declared. We believe that all VAT registered businesses are
subject to this audit. As a result, our total indirect tax
receivables has increased to approximately US$165 million during the quarter, of which
approximately US$21 million of this
is covered by the MOS, following the total offset of North Mara
corporate tax mentioned above. Approximately US$7 million of the receivable is identified as a
long term receivable, with the balance short term.
As disclosed above, the new legislation included an Amendment to
the VAT Act 2015 so that no input tax credit can be claimed for the
exportation of raw minerals, with effect from 20 July 2017. Whilst we are seeking further
clarity on the application of the Amendment to the VAT Act 2015, we
expect that we will continue to incur outflows related to VAT,
notwithstanding exemptions that apply under the MDAs.
Board Changes
As previously reported, Peter
Tomsett stepped down from the Acacia Board of Directors
following the 2017 Annual General Meeting. Post period end,
Ambassador (retd) Juma Mwapachu retired from the Board after six
years of service as his term of appointment expired. Following
these changes, the Acacia Board comprise 7 members, including 4
Independent Non-Executive Directors, two Non-Executive Directors
and one Executive Director. Acacia continues to assess the ongoing
composition of the Board and will announce a replacement Senior
Independent Director in due course.
Acacia would like to thank 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 the
first half of 2017 and due to the level of uncertainty over full
year cash flow expectations, the Board of Directors has not
recommended the payment of an interim dividend.
International Employee Work Permits
During the second quarter Acacia, and a number of its key
contractors, experienced difficulty when applying for work and
residence permits (as both are required to work in country) for
international workers. This has had a particular impact on our
underground development contractor at both Bulyanhulu and North
Mara and led to a reduction in development metres as a result of
the reduction in available staff. Together with the contractor,
Acacia is working to resolve this issue with the Tanzanian Ministry
of Labour, but expects full year development metres at both
Bulyanhulu and North Mara to be behind plan.
Outlook
Our three mines continue to produce and sell gold doré whilst
stockpiling gold/copper concentrate. As mentioned above, as at
30 June 2017 we have approximately
127,000 ounces of gold, 8.3 million pounds of copper and 107,000
ounces of silver contained within unsold concentrate. We reiterate
our group production guidance range of between 850,000-900,000
ounces, although are now targeting the lower end of this range.
This is a result of full year expectations at Bulyanhulu being
approximately 10% lower than previously planned due to lower
underground productivities. Despite this, we continue to expect
full year group all-in sustaining costs of between US$880 – US$920 per
ounce and cash cost per ounce of between US$580 – US$620 per
ounce. Our cost guidance is inclusive of the payment of the higher
royalties and clearing fee, which are currently being paid under
protest. In light of ongoing developments in Tanzania we continue to assess our capital
expenditure and now expect this to be between US$180-200 million for the year as we defer
non-essential spend. We continue to review broader spending across
the business to ensure that we manage cash outflows whilst we are
unable to export 100% of our production.
Key
Statistics |
Three months ended 30 June |
Six months ended 30 June |
(Unaudited) |
2017 |
2016 |
2017 |
2016 |
Tonnes
mined (thousands of tonnes) |
8,558 |
9,939 |
18,039 |
19,346 |
Ore
tonnes mined (thousands of tonnes) |
3,996 |
2,244 |
7,212 |
4,689 |
Ore
tonnes processed (thousands of tonnes) |
2,440 |
2,412 |
4,860 |
4,900 |
Process recovery rate exc. tailings reclaim (percent) |
93.0% |
89.6% |
93.2% |
92.6% |
Head
grade exc. tailings reclaim (grams per tonne) |
3.3 |
3.7 |
3.4 |
3.2 |
Process recovery rate inc. tailings reclaim (percent) |
89.3% |
88.9% |
89.6% |
87.7% |
Head
grade inc. tailings reclaim (grams per tonne) |
3.0 |
3.2 |
3.1 |
3.0 |
Gold
production (ounces) |
208,533 |
221,815 |
428,203 |
412,025 |
Gold
sold (ounces) |
127,694 |
216,782 |
312,438 |
400,963 |
Copper
production (thousands of pounds) |
4,409 |
4,624 |
9,065 |
8,427 |
Copper
sold (thousands of pounds) 3 |
(1,183) |
4,403 |
1,304 |
8,084 |
Cash
cost per tonne milled exc. tailings reclaim
(US$/t)1 |
34 |
62 |
43 |
60 |
Cash
cost per tonne milled inc. tailings reclaim
(US$/t)1 |
30 |
54 |
37 |
52 |
Per
ounce data |
|
|
|
|
Average spot gold price2 |
1,257 |
1,260 |
1,238 |
1,221 |
Net average realised gold
price1 |
1,255 |
1,258 |
1,235 |
1,209 |
Total cash cost1 |
577 |
595 |
577 |
640 |
All-in sustaining cost1 |
835 |
926 |
893 |
941 |
Average realised copper price (US$/lb) |
2.56 |
2.16 |
2.99 |
2.13 |
Financial results
|
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited, in US$'000 unless otherwise stated) |
2017 |
2016 |
|
2017 |
2016 |
Revenue |
157,763 |
284,038 |
|
391,664 |
504,947 |
Cost
of sales |
(94,571) |
(183,539) |
|
(243,967) |
(355,439) |
Gross
profit |
63,192 |
100,499 |
|
147,697 |
149,508 |
Corporate administration |
(5,878) |
(4,469) |
|
(12,520) |
(9,771) |
Share
based payments |
18,209 |
(15,697) |
|
7,785 |
(19,635) |
Exploration and evaluation costs |
(9,372) |
(5,199) |
|
(16,150) |
(11,150) |
Corporate social responsibility expenses |
(1,544) |
(1,744) |
|
(3,739) |
(4,614) |
Other
(charges)/ income |
(8,802) |
2,776 |
|
(19,617) |
2,168 |
Profit
before net finance expense and taxation |
55,805 |
76,166 |
|
103,456 |
106,506 |
Finance income |
946 |
197 |
|
1,543 |
490 |
Finance expense |
(3,216) |
(2,514) |
|
(5,454) |
(5,380) |
Profit
before taxation |
53,535 |
73,849 |
|
99,545 |
101,616 |
Tax
expense |
(17,819) |
(27,567) |
|
(37,002) |
(107,744) |
Net
profit/(loss) for the period |
35,716 |
46,282 |
|
62,543 |
(6,128) |
1 These are non-IFRS financial performance measures
with no standard meaning under IFRS. Refer to “Non IFRS measures”
on page 28 for definitions.
2 Reflect the London PM fix price.
3 Negative sales quantities relate to the reversal of
sales recorded during Q1 2017.
For further information, please visit our website:
http://www.acaciamining.com/ or contact:
Acacia Mining plc |
+44 (0) 207 129 7150 |
Brad Gordon, Chief Executive
Officer
Andrew Wray, Chief Financial
Officer
Giles Blackham, Investor
Relations Manager
Camarco |
+44 (0) 20 3757 4980 |
Gordon Poole / Billy Clegg / 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 producing mines, all
located in north-west Tanzania:
Bulyanhulu, Buzwagi, and North Mara and a portfolio of exploration
projects in Tanzania, 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
21 July 2017 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 3059 8125 / +1 724 928 9460
Password:
Acacia
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
|
|
Interim Operating
Review |
9 |
Exploration Review |
15 |
Financial Review |
21 |
Significant judgements in applying
accounting policies and key sources of estimation uncertainty |
27 |
|
|
Non-IFRS measures |
28 |
Risk Review |
32 |
Condensed Financial
Information: |
|
|
|
- Consolidated Income
Statement and Consolidated Statement of Comprehensive Income |
36/37 |
- Consolidated Balance
Sheet |
38 |
- Consolidated
Statement of Changes in Equity |
39 |
- Consolidated
Statement of Cash Flows |
40 |
- Notes to the
Condensed Financial Information |
41 |
|
|
|
|
Operating Review
Half Year Review
Despite the uncertainty caused by the operating environment in
Tanzania, Acacia has continued to
record impressive safety results, with a H1 Total Recordable Injury
Frequency Rate (TRIFR) of 0.40, which is 49% lower than the
corresponding period in 2016. This performance is coupled
with a decrease in the Injury Severity Rate and the number of High
Potential Incidents recorded as compared to the corresponding
period in 2016. The site management team continues to engage
and communicate regularly with the workforce on the situation in
Tanzania and to conduct audits and
inspections of all workplaces. All operations maintain
excellent house-keeping and empower and encourage the workforce to
stop work if the need requires.
Acacia delivered first half production of 428,203, an increase
of 4% year on year, while AISC of US$893 per ounce sold and cash cost of
US$577 per ounce sold were 5% and 10%
respectively lower than H1 2016. As a result of the ban on the
export of gold/copper concentrate, sales ounces trailed production
by approximately 115,000 ounces. For reference purposes, if H1
sales ounces equalled H1 production, AISC would have been
approximately US$800 per ounce and
cash costs would have been approximately US$569 per ounce.
North Mara achieved production of 179,578 ounces for the first
half, up 3% from H1 2016. This was a result of 2% higher head grade
driven by the preferential processing of higher grade stockpile ore
from the Nyabirama pit; as well as continued high grades from the
Gokona underground mine albeit slightly lower on average than H1
2016, combined with a 1% improvement in recoveries. Gold ounces
sold of 178,130 ounces were 5% higher than the comparative period
and broadly in line with production. Ore tonnes from underground
mining were 50% higher in the first half, due to Gokona underground
development being at a more advanced stage with access to more
stopes compared to H1 2016. AISC of US$736 per ounce sold was 2% higher than H1 2016
(US$720) primarily due to slightly
higher cash costs, higher capitalised development costs and higher
sustaining capital expenditure offset by the impact of increased
sales volumes.
At Buzwagi, gold production of 126,084 ounces was 57% higher
than H1 2016, and in line with expectations. This was mainly due to
a 50% increase in head grade driven by higher grade ore mined from
the main ore zone at the bottom of the open pit in H1 2017. AISC
per ounce sold of US$770 was 31%
lower than in H1 2016, mainly driven by the increased production
base, lower cash cost and lower sustaining capital expenditure,
partly offset by the impact of lower sales volumes on individual
cost items.
Bulyanhulu produced 122,542 gold ounces, 22% lower than the same
period in 2016. This was due to a 25% decrease in ounces produced
from underground mining over H1 2016, mainly driven by a 16%
decrease in throughput due to lower ore tonnes mined, together with
a 12% decrease in head grade, mainly due to the impact of mine
sequencing. AISC per ounce sold for the first half of US$1,340 was 38% higher than H1 2016 (US$970) driven by the impact of lower sales
ounces on individual cost items, higher cash costs and higher
capitalised development costs, slightly offset by lower sustaining
capital spend.
Total tonnes mined during the first half amounted to 18.0
million tonnes, 7% lower than H1 2016, mainly as a result of a 48%
decrease in total waste tonnes mined at Buzwagi as the open pit
will conclude later this year. Ore tonnes mined of 7.2 million
tonnes were 54% higher than H1 2016 driven predominantly by
increased ore tonnes from Buzwagi as a result of improved access to
ore zones in the final stage of the open pit in H1 2017.
Ore tonnes processed amounted to 4.9 million tonnes, slightly
lower than H1 2016. Lower run of mine tonnes at Bulyanhulu and
lower throughput at North Mara was partly offset by higher
reprocessed tailing throughput at Bulyanhulu.
Head grade for the period (excluding tailings retreatment) of
3.4g/t was 6% higher than in H1 2016 (3.2g/t) primarily driven by a
50% higher head grade at Buzwagi as a result of higher grade ore
mined.
Cash costs of US$577 per ounce
sold for the year to date were 10% lower than in H1 2016, primarily
due to:
- Higher production base (US$23/oz);
- Increased investment in ore stockpiles, mainly at Buzwagi
(US$33/oz);
- Lower consumable costs (US$18/oz)
mainly driven by improved consumable unit costing and usage
optimisation;
- Increased capitalised mining, mainly driven by increased
capitalised stripping at North Mara relating to the Nyabirama Cut 4
cutback (US$17/oz); and
- Lower sales related costs due to lower sales volumes caused by
the concentrate ban (US$34/oz)
This was offset by
- Lower co-product revenue in the form of copper concentrates
(US$46/oz); and
- Increased contracted services costs mainly relating to
development and drilling contracts (US$23/oz).
Included in cost of sales and ultimately cash cost for the first
half, is a credit of approximately US$63.6
million (US$204/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$893
per ounce sold for the first half was 5% lower than H1 2016,
despite the lag in sales against production. This was driven by the
lower cash costs (US$64/oz) as well
as a credit relating to share based payment revaluation driven by
the approximate 33% reduction in the Acacia share price
(US$25/oz), partly offset by the
impact of lower sales volumes on individual cost items
(US$85/oz) and higher capitalised
development costs at both North Mara and Bulyanhulu (US$16/oz).
If our sales ounces equalled production, AISC for the first half
would have been approximately US$800
per ounce sold, compared to US$916
per ounce sold on the same basis in H1 2016, a decrease of 13%, and
excluding the impact of non-cash share based payment revaluation
credits would have been approximately US$819.
Cash from operating activities of US$1.3
million compared negatively to the inflow of US$157.1 from H1 2016. The inability to export
our concentrate has had a negative impact on operating cash flow of
approximately US$163 million. Working
capital outflows mainly relating to increases in supplies inventory
and indirect tax receivables further impacted cash generated from
operating activities.
Capital expenditure amounted to US$92.5
million compared to US$85.2
million in H1 2016. Capital expenditure primarily comprised
of capitalised development and stripping (US$64.3 million), investment in mobile equipment
and component change-outs at both North Mara and Bulyanhulu
(US$6.6 million), investment in fixed
equipment and mining infrastructure mainly at Bulyanhulu
(US$4.6 million), and land purchases
at North Mara (US$1.2 million).
Second Quarter Review
Acacia recorded 5 Lost Time Injuries during the quarter with 3
at Bulyanhulu, 1 at North Mara and 1 with Discovery in Kenya, a decrease of 37% on the same period in
2016. Two of the injured were Acacia employees, whilst three were
contractor employees. Of the 9 Medically Treated Incidents in Q2
2017, all were contractor employees, which is a focal point in Q3
2017. Q2 Total Recordable Injury Frequency Rate (TRIFR) of 0.51 was
38% lower than the corresponding period in 2016.
Production for Q2 2017 amounted to 208,533 ounces, a decrease of
6% on the same period in 2016.
North Mara produced 83,110 ounces in Q2 2017, 17% lower than in
Q2 2016 and a 13% decrease from Q1 2017, driven by lower head
grades compared to Q2 2016, mainly as a result of lower mine grades
year on year. Total open pit tonnes mined decreased by 5% from Q2
2016 driven by lower waste mined in the Nyabirama pit while total
ore tonnes mined increased by 18% compared to the same period. Ore
tonnes from underground mining of 162kt were 91% higher in Q2 2017,
due to Gokona underground development being at an advanced stage
with access to more stopes compared to Q2 2016. Cash cost per ounce
sold of US$476 was 25% higher than in
Q2 2016, primarily driven by the lower production base, lower
capitalised development costs mainly due to lower waste stripping
at the Nyabirama pit and higher direct mining costs driven by
higher labour, fuel and consumables cost. AISC of US$758 per ounce sold was 7% higher than in Q2
2016 due to a lower production base and higher cash costs, partly
offset by lower capitalised development costs and a decrease in
sustaining capital expenditure.
At Buzwagi, gold production for the quarter of 66,228 ounces was
53% higher than Q2 2016, and 11% ahead of Q1 2017. Total tonnes
mined decreased by 22% from Q2 2016 while ore tonnes mined were
more than double compared to the prior quarter due to the focus of
mining at the bottom of the pit which contains more ore tonnes.
Cash cost per ounce sold of US$705
was 26% lower than Q2 2016 mainly due to lower direct mining costs
driven by lower consumable and external services costs, lower sales
related costs due to lower sales volumes combined with the impact
of the higher production base partly offset by lower co-product
revenue. AISC of US$762 per ounce
sold was 25% lower than Q2 2016, primarily due to lower cash cost
combined with a credit relating to share based payment valuations,
partially offset by the effect of lower sales volumes on the
individual cost items.
Bulyanhulu produced 59,196 ounces, 25% lower than the same
period in Q2 2016 and 6% lower than Q1 2017. Ounces produced from
underground mining amounted to 50,340 ounces, a 28% decrease on Q2
2016 mainly due to lower ore tonnes received from underground
combined with a 10% decrease in grade, while ounces produced from
the reprocessing of tailings amounted to 8,856 ounces, an increase
of 6%. Lower mining tonnes of 203,000 tonnes were mainly due to
lower productivities as well as inaccessibility of certain stopes.
AISC amounted to US$1,558 per ounce
sold for the quarter, 63% higher than in Q2 2016 and 3% lower than
Q1 2016, mainly driven by the lower production base and the effect
of lower sales volumes on the individual cost items combined with
higher cash costs for the quarter.
Total tonnes mined during the quarter amounted to 8.6 million
tonnes, 14% lower than Q2 2016 while total ore tonnes mined of 4.0
million tonnes exceeded the comparative period by 78%. This was
mainly due to increased ore tonnes from North Mara and Buzwagi.
Total tonnes processed amounted to 2.4 million tonnes, broadly
in line with Q2 2016, with head grade for the quarter (excluding
tailings retreatment) of 3.3g/t was 11% lower than Q2 2016 (3.7g/t)
due to lower grades at North Mara and Bulyanhulu.
Capital expenditure for the quarter amounted to US$45.6 million compared to US$49.1 million in Q2 2016, a decrease of 7%.
Capital expenditure primarily comprised capitalised development
(US$30.5 million), expansion capital
relating to capitalised drilling at North Mara (US$3.5 million), investment in fixed equipment
and mining infrastructure (US$5.4
million) and investment in mobile equipment and component
change-out costs (US$4.0
million).
Mine Site Review
Bulyanhulu
Key statistics
|
|
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
Key operational
information: |
|
|
|
|
|
|
Ounces
produced |
oz |
59,196 |
78,643 |
|
122,542 |
157,069 |
Ounces
sold |
oz |
27,409 |
78,271 |
|
81,214 |
150,719 |
Cash
cost per ounce sold1 |
US$/oz |
813 |
662 |
|
795 |
661 |
AISC
per ounce sold1 |
US$/oz |
1,558 |
958 |
|
1,340 |
970 |
Copper
production |
Klbs |
1,313 |
1,710 |
|
2,811 |
3,527 |
Copper
sold2 |
Klbs |
(357) |
1,574 |
|
599 |
3,154 |
Run-of-mine: |
|
|
|
|
|
|
Underground ore tonnes hoisted |
Kt |
204 |
236 |
|
409 |
479 |
Ore
milled |
Kt |
202 |
250 |
|
423 |
502 |
Head
grade |
g/t |
8.6 |
9.6 |
|
8.5 |
9.7 |
Mill
recovery |
% |
89.9% |
90.8% |
|
90.7% |
89.3% |
Ounces
produced |
oz |
50,340 |
70,307 |
|
104,596 |
140,083 |
Cash
cost per tonne milled1 |
US$/t |
91 |
185 |
|
133 |
180 |
Reprocessed
tailings: |
|
|
|
|
|
|
Ore
milled |
Kt |
410 |
402 |
|
823 |
780 |
Head
grade |
g/t |
1.4 |
1.4 |
|
1.4 |
1.5 |
Mill
recovery |
% |
46.9% |
45.6% |
|
47.2% |
45.9% |
Ounces
produced |
oz |
8,856 |
8,336 |
|
17,946 |
16,986 |
Capital
Expenditure |
|
|
|
|
|
|
- Sustaining capital |
US$('000) |
4,387 |
4,421 |
|
8,599 |
11,506 |
- Capitalised development |
US$('000) |
14,984 |
15,270 |
|
31,054 |
28,438 |
- Expansionary capital |
US$('000) |
504 |
559 |
|
982 |
753 |
|
|
19,875 |
20,250 |
|
40,635 |
40,697 |
- Non-cash
reclamation asset adjustments |
US$('000) |
(851) |
5,723 |
|
191 |
9,937 |
Total capital
expenditure |
US$('000) |
19,024 |
25,973 |
|
40,826 |
50,634 |
1These are non-IFRS financial performance measures
with no standard meaning under IFRS. Refer to ‘Non-IFRS measures”
on page 28 for definitions.
2Negative sales quantities relate to the reversal of
sales recorded during Q1 2017.
Operating performance
Gold production for the first half of 122,542 ounces was 22%
lower than the same period in 2016. This was due to a 25% decrease
in ounces produced from underground mining over H1 2016, driven by
a 16% decrease in throughput and a 12% reduction in head grade
During H1 2017, we increasingly experienced lower underground
productivities which impacted both tonnes mined and head grades.
Whilst we expect improvement on both measures in the second half,
full year output is expected to be approximately 10% lower than
previously planned. Production from the reprocessing of tailings
saw an increase of 6% against H1 2016 due to an increase in
throughput and recoveries, which was partially offset by slightly
lower grades.
Production during the quarter comprised of 24,911 ounces of gold
in concentrate and 34,285 ounces of gold in doré, amounting to a
total of 55,699 ounces of gold in concentrate and 66,843 ounces of
gold in doré for the first half of 2017.
Gold sold for the year to date amounted to 81,214 ounces, 46%
lower than H1 2016 and 34% lower than production, mainly as a
result of the inability to export concentrate from early March
combined with the lower production base. Sales ounces for the
quarter also included a negative sales adjustment of 7,480 ounces
due to reversals made for concentrate shipments previously sold but
subsequently reversed due to the concentrate not being able to
leave port.
Copper production of 2.8 million pounds for the year to date
compared negatively to the comparative period by 20%, mainly as a
result of lower copper grades. Copper sold was 81% lower than H1
2016, primarily due to the lack of exports of concentrate combined
with lower copper production. Negative copper sales pounds for the
quarter in the main relate to 342,273 pounds of copper concentrate,
previously recorded as sales, but subsequently reversed due to the
current export ban on mineral concentrates.
Cash costs of US$795 per ounce
sold were 20% higher than H1 2016 (US$661), mainly due to the lower production base
(US$189/oz), increased contracted
services costs (US$76/oz) driven by
increased mine development costs and lower co-product revenue
(US$67/oz). This was partly offset by
lower sales related costs due to lower sales volumes (US$92/oz), lower consumable costs due to
optimised usage and improved unit costs (US$35/oz) and lower maintenance costs
(US$34/oz).
AISC per ounce sold for the first half of US$1,340 was 38% higher than H1 2016 (US$970) driven by the impact of lower sales
ounces on individual cost items ($264/oz), higher cash cost as explained above
(US$134/oz) and higher capitalised
development costs ($32/oz), slightly
offset by lower sustaining capital spend ($36/oz). Should we have been able to sell all
ounces produced, AISC would have been approximately US$1,140 per ounce.
Capital expenditure for the first half before reclamation
adjustments amounted to US$40.6
million, slightly lower than H1 2016 (US$40.7 million). This is the result of lower
sustaining capital expenditure offset by higher capitalised
development. Capital expenditure mainly consisted of capitalised
underground development costs (US$31.1
million), investment in mobile equipment and component
change-outs (US$2.9 million) and
investment in fixed equipment and mining infrastructure including
the West fan upgrade and underground ventilation raise boring
(US$2.9 million).
Buzwagi
Key statistics
|
|
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
Key operational
information: |
|
|
|
|
|
|
Ounces
produced |
oz |
66,228 |
43,156 |
|
126,084 |
80,219 |
Ounces
sold |
oz |
15,895 |
42,971 |
|
53,094 |
80,404 |
Cash
cost per ounce sold1 |
US$/oz |
705 |
948 |
|
697 |
1,052 |
AISC
per ounce sold1 |
US$/oz |
762 |
1,019 |
|
770 |
1,124 |
Copper
production |
Klbs |
3,095 |
2,915 |
|
6,253 |
4,900 |
Copper
sold2 |
Klbs |
(826) |
2,829 |
|
705 |
4,929 |
Mining
information: |
|
|
|
|
|
|
Tonnes
mined |
Kt |
4,297 |
5,497 |
|
9,564 |
11,423 |
Ore
tonnes mined |
Kt |
2,898 |
1,302 |
|
4,951 |
2,605 |
Processing
information: |
|
|
|
|
|
|
Ore
milled |
Kt |
1,119 |
1,054 |
|
2,195 |
2,182 |
Head
grade |
g/t |
1.9 |
1.3 |
|
1.8 |
1.2 |
Mill
recovery |
% |
96.6% |
94.8% |
|
96,7% |
94.6% |
Cash
cost per tonne milled1 |
US$/t |
10 |
39 |
|
17 |
39 |
Capital
Expenditure |
|
|
|
|
|
|
- Sustaining capital |
US$('000) |
724 |
1,081 |
|
865 |
2,231 |
- Capitalised development |
US$('000) |
- |
- |
|
- |
- |
|
|
724 |
1,081 |
|
865 |
2,231 |
- Non-cash
reclamation asset adjustments |
US$('000) |
79 |
1,586 |
|
(1) |
3,007 |
Total capital
expenditure |
US$('000) |
803 |
2,667 |
|
864 |
5,238 |
1These are non-IFRS
financial performance measures with no standard meaning under IFRS.
Refer to “Non-IFRS measures” on page 28 for definitions.
2Negative sales quantities relate to the reversal of
sales recorded during Q1 2017.
Operating performance
Gold production for the first half of 126,084 ounces was 57%
higher than the comparative period in 2016 mainly due to a 50%
increase in grade as a result of higher grade ore mined from the
main ore zone at the bottom of the stage 3 pit in H1 2017 compared
to the focus on waste movement in the first half of 2016 in order
to mine the stage 3 pushback. This was further assisted by a 2%
increase in mill recoveries due to improved mill availability and
improved milling rates.
Production during the quarter was comprised of 40,210 ounces of
gold in concentrate and 26,027 ounces of gold in doré, amounting to
a total of 80,202 ounces gold in concentrate and 45,882 ounces gold
in doré for the first half of the year.
Gold sold for the year to date amounted to 53,094 ounces, 34%
lower than H1 2016 and 58% lower than production, a direct result
of the inability to export concentrate from early March 2017 slightly offset by a higher production
base compared to the comparative period. Sales ounces for the
quarter also included a negative sales adjustment of 10,724 ounces
due to reversals made for concentrate shipments previously sold but
subsequently reversed due to the concentrate not being able to
leave port.
Copper production of 6.3 million pounds for the year to date was
28% higher than the comparative period mainly due to increased
copper grades. Copper sold was 86% lower than H1 2016, primarily
due to the lack of mineral concentrate exports. Negative copper
sales pounds for the quarter in the main relate to 781,423 pounds
of copper concentrate, previously recorded as sales, but
subsequently reversed due to the current export ban on mineral
concentrates.
Total tonnes mined of 9.6 million tonnes were 16% lower than H1
2016, primarily due to the focus of mining at the bottom of the pit
in H1 which contains more ore tonnes compared to waste movement
during H1 2016 resulting in 90% higher ore tonnes mined during the
first half of 2017.
Cash costs for the first half of US$697 per ounce sold were significantly lower
than H1 2016 (US$1,052/oz), primarily
driven by the impact of the higher production base (US$315/oz), lower sales related cost due to lower
sales volumes (US$88/oz), lower
consumable spend due to lower unit costs and optimisation of usage
(US$115/oz). This was partly offset
by lower co-product revenue in the form of copper concentrates
(US$177/oz). As a result of the
significant inventory credit resulting from the lack of sales, cash
cost per tonne milled of US$17 per
tonne was significantly lower than the previous period.
AISC per ounce sold of US$770 was
31% lower than the H1 2016. This was mainly driven by lower cash
costs as explained above (US$354/oz).
Should we have been able to sell all ounces produced, AISC would
have been approximately US$589 per
ounce.
Capital expenditure before reclamation adjustments of
US$0.9 million was 61% lower than H1
2016 (US$2.2 million). Capital
expenditure for the year to date consisted of the corrosion
treatment of the process plant and investment in tailings storage
facility.
North Mara
Key statistics
|
|
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
Key operational
information: |
|
|
|
|
|
|
Ounces
produced |
oz |
83,110 |
100,016 |
|
179,578 |
174,737 |
Ounces
sold |
oz |
84,390 |
95,540 |
|
178,130 |
169,840 |
Cash
cost per ounce sold1 |
US$/oz |
476 |
382 |
|
441 |
427 |
AISC
per ounce sold1 |
US$/oz |
758 |
707 |
|
736 |
720 |
Open pit: |
|
|
|
|
|
|
Tonnes
mined |
Kt |
3,896 |
4,120 |
|
7,750 |
7,234 |
Ore
tonnes mined |
Kt |
733 |
620 |
|
1,536 |
1,395 |
Mine
grade |
g/t |
1.7 |
2.1 |
|
1.8 |
1.8 |
Underground: |
|
|
|
|
|
|
Ore
tonnes trammed |
Kt |
162 |
85 |
|
316 |
210 |
Mine
grade |
g/t |
8.4 |
13.8 |
|
9.0 |
11.9 |
Processing
information: |
|
|
|
|
|
|
Ore
milled |
Kt |
709 |
705 |
|
1,419 |
1,436 |
Head
grade |
g/t |
4.0 |
4.8 |
|
4.3 |
4.1 |
Mill
recovery |
% |
92.3% |
92.3% |
|
92.5% |
91.4% |
Cash
cost per tonne milled1 |
US$/t |
57 |
52 |
|
55 |
50 |
Capital
Expenditure |
|
|
|
|
|
|
- Sustaining capital2 |
US$('000) |
5,921 |
7,703 |
|
12,177 |
10,081 |
- Capitalised development |
US$('000) |
15,485 |
19,396 |
|
33,282 |
31,051 |
- Expansionary capital |
US$('000) |
2,953 |
372 |
|
4,489 |
458 |
|
|
24,359 |
27,471 |
|
49,948 |
41,590 |
- Non-cash
reclamation asset adjustments |
US$('000) |
(180) |
3,075 |
|
(56) |
6,252 |
Total capital
expenditure |
US$('000) |
24,179 |
30,546 |
|
49,892 |
47,842 |
1These are non-IFRS financial performance measures
with no standard meaning under IFRS. Refer to ‘Non-IFRS measures”
on page 28 for definitions.
2 Includes land purchases recognised as long term
prepayments
Operating performance
Gold production for the first half of 179,578 ounces was
slightly higher than in H1 2016. This was a result of 5% higher
head grade driven by the preferential processing of higher grade
ore from the Nyabirama pit as well as continued high grades from
the Gokona underground mine, combined with a 1% improvement in
recoveries. Gold ounces sold for the year of 178,130 ounces were 5%
higher than the comparative period and broadly in line with
production.
Ore tonnes from underground mining were 50% higher in the first
half, due to Gokona underground development providing access to
more stopes compared to H1 2016. 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$441 per ounce
sold were 3% higher than H1 2016 (US$427/oz), mainly driven by higher direct mining
costs due to increased labour, fuel and consumable costs
(US$52/oz), partly offset by higher
capitalised development cost (US$23/oz) and the higher production base
(US$9/oz).
AISC of US$736 per ounce sold was
2% higher than H1 2016 (US$720/oz)
primarily due to higher cash costs (US$14/oz), higher capitalised development costs
(US$13/oz) and higher sustaining
capital expenditure (US$12/oz) offset
by the impact of increased sales volumes (US$14/oz).
Capital expenditure for the year before reclamation adjustments
of US$49.9 million was 20% higher
than in H1 2016 (US$41.6 million).
Key capital expenditure include capitalised stripping costs
(US$25.9 million), capitalised
underground development costs (US$7.4
million), capitalised drilling expenditure (US$4.5 million) and investment in mobile
equipment and component change-outs (US$3.7
million). In addition, US$1.2
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.
Exploration Review
Brownfield Exploration
Tanzania
Significant brownfield programmes and budgets were approved for
2017 for North Mara to undertake surface and underground drilling
activities at Gokona, Nyabirama, and Nyabigena. Underground
drilling also continues on the Reef 2 series at Bulyanhulu to
increase confidence in the resources and reserves in the Reef 2
Central area.
North Mara
Gokona Underground
A total of 55 holes for 7,593 metres of extension and infill
drilling were completed at Gokona underground during H1 2017.
Significant drilling activity during H1 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. Several wide and high grade intercepts were returned from
this drill programme extending the previously modelled
mineralisation including:
- UGKD00320 33.0m
@ 38.2 g/t Au from 36m
- UGKD00321 31.0m
@ 14.7 g/t Au from 31m
- UGKD00323 24.8m
@ 133.5 g/t Au from 35m
- UKGC_00299 29.1m @ 10.1g/t Au
from 83m
- UGKD_00303 26.0m @ 40.8g/t Au
from 110m
- UKGC_00308 23.0m @ 42.7g/t Au
from 121m
Additionally, several high grade intercepts were returned
adjacent to the Gokona Fault on the east side of the fault
extending the previously modelled mineralisation in this area,
including:
- UGKD_00113* 10.0m @ 10.4 g/t Au from
32m
- UKGC_00251* 25.0m @ 7.00g/t Au from
36m
- UGKD_00107* 24.0m @ 12.5g/t Au from
31m
- UKGC_00262* 19.4m @ 64.7g/t Au from 37m
incl. 2m @ 453g/t Au from 45m
- UKGC_00260* 9.0m @ 59.9g/t Au from 46m
incl. 3m @ 204g/t Au from 49m
Note: * delineates results previously released in Q1 report
In the second half of 2017, underground diamond core drilling
will continue to test the deeper fault offset extension of the
Gokona East mineralisation, test continuity of higher grade
mineralisation beneath the existing open pit and immediately west
of the Gokona Fault, commence drilling of the Gokona Central area
below the open pit, and continue grade control drilling of Gokona
West. The results from this drilling will be incorporated as part
of the updating of the Mineral Resource Model in order to deliver
increased confidence, additional mining areas in the upper part of
the deposit; and confirm and define targets for on-going
extensional diamond drilling. The planned programme will comprise
of approximately 75,000 metres of drilling over the next two years,
with approximately 45,000 metres to be drilled in 2017.
Nyabirama
The second stage of the surface diamond core drilling programme
adjacent to the Nyabirama pit was completed in March, and a
subsequent programme of infill drilling to approximately 50m drill
spacing commenced and was ongoing at the end of H1 2017. A total of
22 holes for 12,985 metres were completed during H1 2017. This
drilling has been successful in delineating the down-dip and
down-plunge extension of higher grade quartz-vein lode structures
to a vertical depth of approximately 950m below surface and
approximately 800m down-plunge to the south-west of the current
open pit.
Better results received during H1 included:
-
NBD0147 3.0m
@ 5.1 g/t Au from 397m, and
4.0m
@ 9.1 g/t Au from 428m
-
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
-
NBD0154
5.0m @ 4.5 g/t Au from 511m,
4.0m @ 4.6g/t Au from 537m, and
3.0m @ 6.5g/t Au from 546m
-
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
-
NBD0160
4.0m @ 4.30g/t Au from 149m, and
3.0m @ 13.1g/t Au from 230m
The results of the infill programme will be incorporated into a
Mineral Resource model to form the basis for further study on a
potential underground development to further test the system and
enable underground production by the time of the completion of the
open pit in 2021.
Nyabigena
A total of 8 holes for 3,955 metres of the planned programme of
approximately 10,000m of surface diamond core drilling were
completed during the first half of 2017 at Nyabigena. This
programme was designed to test the continuity of mineralisation and
structural framework below the existing open pit. Initial results
returned broad zones of low grade gold mineralisation with narrow
restricted higher grade zones, but also confirmed some of the
interpreted structural offsets. The programme was suspended in the
latter part of H1 to focus on surface drilling in higher priority
areas and reduce overall site expenditure. The drilling results
will be incorporated into an updated geological model and Mineral
Resource estimate in due course.
Bulyanhulu
Reef 2 Central
Underground diamond core drilling in H1 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.
In order to increase the understanding of the Reef 2 series of
veins, tighter spaced definition drilling (50m x 50m grid)
commenced in 2016 from existing underground development platforms
in the “Reef 2m Central” area. The drilling coverage tested an area
of approximately 570m vertical and 600m in strike length.
Based on the results received to date the Reef 2m Central vein
is displaying good continuity and has extended the mineralisation a
further 100m vertically, and a further 150m in strike. There is a
notable average grade increase of approximately 25% for the drilled
area. Implications from all the drilling to date is that the
overall tonnes in the resource may go down slightly but there is an
overall grade increase and subsequent ounce increase.
Definition drilling will continue in H2 2017 across the Reef 2m
Central in order to define the economic limits along strike and
confirming the lower vertical limit. Better results during the
period, all true width, include:
- UX3980- 744 3.99m @
54.0g/t Au
- UX3980- 734 5.22m @
17.1g/t Au
- UX3980- 769 3.44m @
23.7g/t Au
- UX3980- 729 2.86m @
23.1g/t Au
- UX4130- 322 3.16m @
36.6g/t Au
- UX4130- 324 3.80m @
15.8g/t Au
Greenfield Exploration
Kenya
West Kenya Project
During H1 2017, we announced the maiden NI 43-101 compliant
Inferred Mineral Resource Estimate (MRE) on the Liranda Corridor,
within our West Kenya Project. The Inferred MRE of 3.46 million
tonnes at 12.1 grams per tonne for 1.31 million ounces is primarily
located on three main zones of mineralisation at the Acacia
prospect. The gold mineralisation at Acacia is associated with
shear zones ranging in width from 0.5 metres to 10 metres
(averaging 3 metres true width, dependent on the zone), hosted by a
mafic volcanic sequence. The strike lengths of the explored
sections of the main mineralised zones at Acacia vary between 200m
and 600m and the resource is currently defined down to a vertical
depth of 750m with the structures open down plunge.
In addition, we identified mineralised zones on the Bushiangala
prospect, approximately one kilometre away from the Acacia
prospect, but at this stage this material remains unclassified due
to drill density and the need to further understand the controls on
the mineralisation and its continuity. Recent results from the
Bushiangala prospect include: 3.0m @ 14.0 g/t Au from 386m, 1.0m @
18.4 g/t Au from 389m and 5.0m @ 4.13 g/t Au from 304m. Based on
the work undertaken up to February
2017, the current scale of the mineralisation at Bushiangala
is between 0.60Mt and 1.60Mt at a grade between 6.0g/t Au and
10.0g/t Au, for a metal target of between 190,000 ounces and
300,000 ounces of contained gold. A key element of the 2017
drilling programmes at Bushiangala is to both move this existing
target mineralisation into the Inferred Resource category and to
expand the scale of the targeted mineralisation.
During H1 2017, a total of 68 diamond holes were completed or
were underway at period end for 33,420 metres, with seven diamond
core drill rigs drilling on various prospects. Current drilling on
the Acacia prospect is targeting a significant expansion to the
resource through testing up and down plunge extensions, as well as,
infill drilling in areas of structural complexity and areas that
previously returned lower grade results.
Drilling during H1 continued to intersect significant high grade
results, however at the end of June we had approximately 23 holes
with assays pending due to the need to send samples to South Africa rather than to Tanzania, due to impact of the current export
ban. As a result, the majority of the results received during the
period are from the first quarter, although visible gold has been
seen in 8 of the 23 holes with assays pending. Better results
received during H1 are:
- LCD0128* - 4.0m @ 33.9g/t Au from 302m, 4.2m @ 19.0g/t Au from
552m, and 2.5m @ 76.7g/t Au from 577m,
- LCD0130* - 3.1m @ 14.1 g/t Au from 197m,
- LCD0132* - 1.3m @ 65.6g/t Au from 301m and 4.7m @ 14.0g/t Au
from
446.5m,
- LCD0133* - 0.5m @ 97.2g/t Au from 585.5m and 3.3m @ 10.9g/t Au
from 753.7m,
- LCD0135* - 3.3m @ 33.0g/t Au from 664.9m and 0.5m @ 25.0g/t Au
from 687m,
- LCD0138* – 1.0m @ 26.0g/t Au from 200m and 2m @ 22.6g/t Au from
214m,
- LCD0146* - 2.5m @ 28.5g/t Au from 270.7m,
- LCD0150* - 1.8m @ 7.56g/t Au from 457.2m and 6.0m @ 6.40g/t Au
from 558m,
- LCD0152* - 6.8m @ 12.7g/t Au from 211.7m,
- LCD0155 - 1.0m @ 18.4g/t Au from 389m and 1.0m @ 9.44 g/t Au
from 399.2m,
- LCD0156 – 3.0m @ 9.32g/t Au from 1067.9m,
- LCD0160 – 3.0m @ 14.0g/t Au from 386m.
Note: * - holes reported during Q1
2017
The current drill programme consists of approximately 48,000
metres of diamond core drilling, planned to be completed during Q3
2017, with the objective of increasing the Acacia Prospect Inferred
resource, producing an initial Inferred resource on the Bushiangala
Prospect, and testing nearby prospects east of the Acacia Prospect,
namely the Shigokho and Shibunane Prospects. We are targeting a
significant increase in the resource to 2 million ounces prior to
the end of 2017. We also plan to commence a scoping study looking
at the potential for an underground mining operation during H2
2017.
Burkina Faso
During H1 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. A major component of H1 2017 work programmes, apart from
drilling, was to review the structural architecture of land holding
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 used
with our surface geochemical data layers to develop priority
drilling targets, and to date we have delineated more than 65
targets warranting follow-up by either mapping or reconnaissance
drilling.
South Houndé Joint Venture – current
ownership 50%, next stage earn-in to 70%
At the South Houndé JV project we continued field-based
exploration activities focused both on resource extensions to the
Tankoro Resource and regional exploration programmes searching for
new discoveries. Acacia has taken over management of the South
Houndé JV and all field activities as of 1st January. During H1
2017 work continued to focus on 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). A
total of 462 Aircore (AC) holes were drilled for a total of 26,957
metres and 18 RC/Diamond holes were drilled for a total of 5,740m.
In addition to this, rock chips (180) and termite mound (97)
samples were collected on regional targets.
Tankoro - MM and MC Zones
During H1 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, Anakine 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 the majority of cases the
high-grade shoots are either lower grade than expected, or of
shorter strike extend that 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
- FRC1071 - 4.1m @ 3.35g/t Au from 511.6m including 1.5m @
8.28g/t Au
- FRC1072 - 3.65m @ 3.01g/t Au from 533.2m including 1.1m @
7.38g/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
The current phase of diamond core and RC drilling continues to
target interpreted high grade domains associated with
cross-structures and is applying the learnings from the initial
holes. Results from more recent drilling are pending and expected
to be received during early H2 2017.
Tankoro Corridor – Phantom, Phantom
East, Guy and Southwest Extensions
RC and diamond core drilling on the Tankoro Corridor targeting
the northeast extension of the mineralised system at the Phantom
and Phantom East prospects was ongoing at the end of H1, with
potential mineralised zones, associated with
sericite-pyrite-arsenopyrite alteration, observed in holes from
both prospects. We also completed a single diamond hole at the Guy
Prospect, with the hole cutting approximately 40m of
sericite-carbonate+/-sulphide alteration and varying intensity of
quartz veining. In the far south west of the Tankoro Corridor we
also commenced a programme of regional Aircore drilling following
up large areas of gold-in-soil geochemistry associated with IP
chargeability anomalies. At the end of the period, assay results
for the various Tankoro Corridor programmes were still pending due
to a backlog of more than one month in the Burkina Faso assay lab. Results are expected
to be received throughout Q3 2017.
Ouangoro Anomaly
Aircore drilling commenced at the beginning of February on the
Ouagoro Anomaly with the plan to drill 19 regional 1km spaced
traverses across a 15-20 kilometre x 4 kilometre zone of
semi-continuous gold-in-soil anomalism along several interpreted
NNE-trending linear geophysical features. To date 10 traverses have
been drilled for 11,490 metres, with results for first eight
traverses being received at period-end. Positive results have been
returned from all traverses including better results of:
- 20m @ 0.67g/t Au from 28m (including 2m @ 3.09g/t Au),
- 8m @ 0.86g/t from surface (including 2m @ 2.32g/t Au),
- 18m @ 0.61g/t Au from 6m (including 4m @ 1.69g/t Au),
- 2m @ 1.80g/t Au from 22m,
- 6m @ 1.04g/t Au from 78m,
- 4m @ 1.34g/t Au from 30m,
- 12m @ 1.73g/t Au from 42m
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. Regionally the anomalous gold zones
intersected in Aircore drilling occur on interpreted 020-trending
shear zones. It is anticipated that infill Aircore drilling (200m
and 400m spaced lines) will be completed as phase 2 of the
programme during H2 2017 and H1 2018, once all results are received
and interpreted.
Central Houndé Joint Venture – current ownership 51%, next stage
earn-in to 80%
Surface geochemical sampling undertaken over the past 24 months
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 (arsenic, molybdenum etc) warranting
follow-up.
Work during the H1 included mapping and lithological sampling,
infill soil sampling, multi-element analysis, RC drilling and a
structural interpretation using all available datasets. During the
half, a total of 596 soil samples and 43 rock chips were collected.
During the 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 shear mafic volcanic rocks and
boudinaged quartz vein zones. RC drilling in the Legue NW Corridor
to test these anomalous rock chip zones commenced early June and at
the end of H1 a total of 9 RC holes for a total of 1,421 metres had
been completed. Once all results have been received and this phase
of the drilling programme has been completed we will assess what is
required for phase 2 of the programme.
Pinarello & Konkolikan Joint Venture (Canyon Resources
Limited) – current ownership 75%, potential to earn 100%
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.
We continue to follow up the previous season’s surface
geochemical and Aircore drilling programs at Pinarello. A total of
421 Aircore holes for an aggregate of 23,089 metres were completed
on the Tankoro Corridor SW extension, Gaghny, Tangalobe, Dafala and
Dopala prospects. More significant results from 2016 / 2017 Aircore
drilling campaigns were followed up with 37 RC holes for an
aggregate of 5,803 metres. While not all results are available yet,
results received to date are mixed with only a small number of
significant gold intercepts warranting further follow-up.
Results from Aircore drilling along the Tangaloble and Tankoro
Corridors is considered positive with better results of: 3m @
0.77g/t from 29m; 3m @ 0.72g/t Au from 5m; 4m @ 1.64g/t Au from
49m; 2m @ 6.0g/t Au from 57m; 6.0m @ 1.18 g/t Au from 14.0m,
including 2.0m @ 3.09 g/t Au from 14.0m; 4m @ 0.68g/t Au from 20m,
and 8m @ 0.52g/t Au from 14m mostly associated with quartz veins,
oxidised sulphides and haematite.
Results from RC drilling at Gaghny and Tangalobe returned a
number of anomalous intercepts associated with
sericite-fuchsite-carbonate altered sediments and quartz
veins-sericite-heamatite altered sediments respectively. Better
intercepts include: 2.0m @ 0.61g/t Au from 99m and 1m @ 3.07g/t Au
from 106m; 1m @ 3.24 g/t Au from 92m; 13.0m @ 1.06 g/t Au from 136m
and 5.0 m @ 0.68 g/t Au from 141m; 1m @ 4.85 g/t Au from 1m and 10m
@ 0.44 g/t Au from 52m.
Acacia has now 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%. Programmes for H2 2017 include RC drilling,
Aircore drilling, geological mapping, prospect reviews, further
infill soil sampling and trenching.
Frontier JV – earning 100% through option payments
Regional regolith and geological mapping has been completed for
both licences. 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 yet to be completed. A total of 6,035 soil, 44 rock chip and
1,043 termite samples were collected during H1 2017. In addition to
this a detailed structural magnetic interpretation and targeting
exercise has been completed. 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. During H2 2017 work will comprise
data collation and interpretation, infill soils sampling,
multi-element work and reconnaissance Aircore drilling of high
priority coincident geochemical and structural/magnetic
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 half, 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. A total of 54 RC holes for 7,260 metres and
2 diamond drill holes for 206 metres were drilled. Drilling to date
can be considered very positive as 5 of the 9 gold anomalies where
results have been received have returned positive gold. Assay
results are still pending for a number of drill traverses, but
better higher grade results returned to date include; 4m @ 18.7g/t
and 4m @ 5.62g/t, and regionally significant drill results
returning broad zones of gold anomalism include; 13m @ 1.11g/t, 15m
@ 0.50g/t, 13m @ 0.50g/t, 25m @ 0.45g/t including 7m @ 1.01g/t, 17m
@ 0.71g/t and 19m @ 0.55g/t.
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.
Bourdala JV – earning 100% through option payments
The Boudala 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 H1 2017, six RC holes for 800 metres were completed
across the Boubou Artisanal Prospect on the Bourdala JV licence.
These returned highly 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, and hole BORC005 ended in mineralisation.
Gourbassi Est – 100%
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 is to review
the historic data and complete mapping and surface sampling
programmes. Dependent on results of this first pass work we would
complete RC and/or diamond core drilling during H1 2017.
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$287M, which includes a US$33M 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. Acacia and
OreCorp have agreed the scope of the Definitive Feasibility Study
(“DFS”) and this commenced in the second quarter.
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. We note
that regulations, which will assist the understanding of the
implementation of the legislation, are not yet available and will
be reviewed once they are.
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 and capital allocation.
The key aspects of our financial performance over the first half of
2017 is summarised below, and should be read in conjunction with
the consolidated condensed interim financial information:
- Revenue of US$391.7 million was
US$113.3 million lower than H1 2016
driven by the 22% decrease in sales volumes mainly as a result of
our inability to sell gold/copper concentrate which deferred
approximately US$175 million in gross
revenue.
- Cash costs decreased to US$577
per ounce sold in the first half of 2017 from US$640 per ounce sold in H1 2016, driven by the
higher production base, lower sales related costs, higher
capitalisation of development costs and lower consumables costs,
partly offset by lower co-product revenue and increased contracted
services costs.
- AISC at US$893 per ounce sold was
5% lower than in H1 2016 (US$941 per
ounce sold), mainly due to lower cash costs and non-cash share
based payment revaluation credits, partly offset by lower sales
volumes despite the higher production base.
- As a result of the above and in combination with higher
exploration charges, EBITDA decreased by 13% to US$161.4 million.
- Lower tax expense of US$37.0
million compared to the prior year expense of US$107.7 million. The current year charge is
driven by year to date profitability mainly from North Mara, while
the prior year expense included the recognition of US$70 million of tax provisions relating to prior
year tax disputes.
- As a result of the above, net earnings amounted to US$62.5 million, compared to a loss of
US$6.1 million in H1 2016.
- Adjusted net earnings of US$65.9
million were US$7.1 million
higher than H1 2016. Adjusted earnings per share amounted to US16.1
cents, up from US14.3 cents in H1 2016.
- Operational cash flow of US$1.3
million decreased from H1 2016, primarily as a result lower
revenue as discussed above, unfavourable working capital outflows
due to a build-up of gold inventory and supplies, an increase in
indirect taxes receivable, and payments of US$26.7 million relating to prepaid and
provisional corporate tax.
The following review provides a detailed analysis of our
consolidated results for 6 months ended 30
June 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
36 to 58, which have been prepared in accordance with International
Financial Reporting Standards as adopted for use in the European
Union (“IFRS”).
Revenue
Revenue for H1 2017 of US$391.7
million was US$113.3 million
lower than H1 2016 due to a 22% decrease in gold sales volumes from
Bulyanhulu and Buzwagi (88,525 ounces) offset by a 5% increase in
sales ounces from North Mara and a 2% increase in the average net
realised gold price from US$1,209 per
ounce sold in H1 2016 to US$1,235 in
H1 2017.
The decrease in revenue during the first half of 2017 was
primarily driven by the ban on export of mineral concentrates which
also resulted in a negative sales adjustment of 18,204 ounces,
approximately US$22.0 million in
revenues, due to reversals made for concentrate shipments sold in
Q1 2017 due to the concentrate not being able to leave port.
The net realised gold price for the year to date of US$1,235/oz was US$3/oz lower than the average market price of
US$1,238/oz due to the timing of
sales. There were no realised losses related to gold hedges during
H1 2017.
Included in total revenue is co-product revenue of US$5.8 million for the 2017 year to date, 71%
lower than the prior period (US$20.3
million), this as a result of the lack of concentrate sales
from early March 2017. The 2017 half
year average realised copper price of US$2.99 per pound compared favourably to that of
H1 2016 (US$2.13 per pound), and was
mainly driven by the higher market price for copper. The benefit of
a higher copper price is however not reflected in H1 2017 revenues
due to a 83% decrease in copper sales volumes. Included in
co-product revenue is a negative sales adjustment of 1.1 million
copper pounds, approximately US$3.0
million in revenues, due to reversals made for concentrate
shipments sold in Q1 2017 but subsequently reversed due to the
concentrate not being able to leave port.
The impact of the ban during the first half of the year has
meant that we have approximately 127,000 ounces of gold contained
in unsold concentrate. In addition, we have approximately 8.3
million pounds of copper and 107,000 ounces of silver contained in
unsold concentrate. If these have been sold, gross revenue and
cashflow would have increased by approximately US$175 million.
Cost of sales
Cost of sales was US$244.0 million
for H1 2016, representing a decrease of 31% on the prior year
period (US$355.4 million). The key
aspects impacting the cost of sales for the year include an 32%
reduction in direct mining costs, primarily driven by higher
capitalised mining costs including a credit of approximately
US$63.3 million relating to a
build-up of finished gold ounces, combined with lower depreciation
and amortisation costs as a result of the lower production base at
Bulyanhulu, lower sales related cost due to lower sales volumes and
minimal realised losses on economic hedges due to majority of
options reaching their settlement date during 2016.
The table below provides a breakdown of cost of sales:
(US$'000) |
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Cost
of Sales |
|
|
|
|
|
Direct
mining costs |
61,527 |
118,535 |
|
160,310 |
234,436 |
Third
party smelting and refining fees |
1,417 |
6,782 |
|
6,738 |
13,639 |
Realised losses on economic hedges |
170 |
2,539 |
|
278 |
6,454 |
Royalty expense |
8,040 |
12,517 |
|
18,682 |
22,534 |
Depreciation and amortisation* |
23,417 |
43,166 |
|
57,959 |
78,376 |
Total |
94,571 |
183,539 |
|
243,967 |
355,439 |
* Depreciation and amortisation
includes credits relating to the depreciation component of the cost
of inventory build-up of US$12.8
million for Q2 2017 (Q2 2016: US$0.9
million) and US$15.8 million
for H1 2017 (H1 2016: US$5.7
million).
A detailed breakdown of direct mining expenses is shown in the
table below:
(US$'000) |
|
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
|
2017 |
2016 |
|
2017 |
2016 |
Direct
mining costs |
|
|
|
|
|
|
Labour |
|
23,859 |
21,728 |
|
47,261 |
43,789 |
Energy
and fuel |
|
21,161 |
21,387 |
|
44,604 |
41,875 |
Consumables |
|
22,262 |
26,482 |
|
47,168 |
52,939 |
Maintenance |
|
26,357 |
27,494 |
|
52,123 |
53,735 |
Contracted services |
|
33,483 |
33,829 |
|
69,497 |
62,383 |
General administration costs |
|
21,788 |
22,362 |
|
42,309 |
43,085 |
Gross
direct mining costs |
|
148,910 |
153,282 |
|
302,962 |
297,806 |
Capitalised mining costs |
|
(87,383) |
(34,747) |
|
(142,652) |
(63,370) |
Total
direct mining costs |
|
61,527 |
118,535 |
|
160,310 |
234,436 |
Gross direct mining costs of US$303.0
million for H1 2017 were 2% higher than H1 2016
(US$297.8 million). The overall
increase was driven by the following:
- An 11% increase in contracted services mainly at Bulyanhulu due
to higher costs associated to underground drilling combined with
higher underground metres drilled, increased service cost for power
generation and contractors employed as part of various mine
projects;
- An 8% increase in labour cost, mainly as a result of production
bonuses paid out at North Mara and Buzwagi; and
- A 7% increase in energy and fuel expenses driven by higher
tonnes mined at North Mara resulting in higher costs relating to
fuel and lubricants.
This was offset by:
- A 11% decrease in consumables costs mainly at Buzwagi due to
lower reagents and chemicals costs as a result of lower cyanide
usage, lower grinding media costs driven by the optimised usage of
grinding balls, lower explosives costs driven by improved blasting
practice combined with lower processing consumables used at
Bulyanhulu driven by lower tonnes processed as well as efficient
usage of reagents; and
- A 3% decrease in maintenance costs mainly at Bulyanhulu due to
reduced maintenance activity and changes to the maintenance
schedules showing continued benefits from planned maintenance
activities.
Capitalised direct mining costs, consisting of capitalised
development costs and investment in inventory is made up as
follows:
(US$'000) |
|
|
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
|
|
2017 |
2016 |
|
2017 |
2016 |
Capitalised direct mining costs |
|
|
|
|
|
|
|
Capitalised development costs |
|
|
(25,962) |
(30,210) |
|
(56,530) |
(51,369) |
Investment in inventory |
|
|
(61,420) |
(4,537) |
|
(86,122) |
(12,001) |
Total
capitalised direct mining costs |
|
|
(87,382) |
(34,747) |
|
(142,652) |
(63,370) |
Capitalised development costs were 125% higher than H1 2016,
primarily driven by a build-up of concentrates in gold ounces at
Bulyanhulu and Buzwagi resulting in an investment in inventory of
US$86.1 million. The increase in
capitalised development cost mainly relate to higher gross direct
mining cost at North Mara resulting in 10% higher capitalised
development during H1 2017.
Central costs
Total central costs amounted to US$4.7
million for H1 2017, a 84% decrease on H1 2016 (US$29.4 million) mainly driven by a non-cash
share based payment revaluation credit as a result of the lower
share price and share price performance compared to 2016,
specifically when compared to our peers and the global mining
index, impacting on the valuation of future share-based payment
liabilities to employees. Acacia’s share price decreased by
approximately 31% compared to December
2016. This was partly offset by a 28% increase in corporate
administration costs as a result of higher legal and consulting
fees paid, slightly offset by lower labour cost across all offices
during H1 2017.
(US$'000) |
|
|
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
|
|
2017 |
2016 |
|
2017 |
2016 |
Corporate administration |
|
|
5,878 |
4,469 |
|
12,520 |
9,771 |
Share-based payments |
|
|
(18,209) |
15,697 |
|
(7,785) |
19,635 |
Total
central costs |
|
|
12,331 |
20,166 |
|
4,735 |
29,406 |
Exploration and evaluation costs
Exploration and evaluation costs of US$16.2 million were incurred in H1 2017, 45%
higher than the US$11.2 million spent
in H1 2016. The key focus areas for the half year were greenfield
exploration programmes in West
Kenya amounting to US$8.0
million and greenfield exploration programmes in
West Africa amounting to
US$7.2 million.
Corporate social responsibility
expenses
Corporate social responsibility costs incurred for H1 2017
amounted to US$3.7 million compared
to the prior year of US$4.6 million.
Corporate social responsibility overheads and central initiatives
in H1 2017 amounted to US$2.3 million
and was higher compared to US$2.1
million in H1 2016. General community projects funded from
the Acacia Maendeleo Fund amounted to US$1.4
million, which was US$1.2
million lower than in H1 2016, driven by the timing of
projects starting.
Other charges
Other charges in H1 2017 amounted to US$19.6 million, compared to an income of
US$2.2 million in H1 2016. The main
contributors include foreign exchange losses of US$4.6 million, legal costs of US$4.6 million mainly relating to legal
representation on historical court cases, retrenchment costs of
US$3.3 million and Acacia’s ongoing
programme of zero cost collar contracts to mitigate the negative
impact of copper, rand and fuel market volatility, which resulted
in a mark-to-market revaluation loss of US$2.4 million (as these arrangements do not
qualify for hedge accounting these unrealised gains are recorded
through profit and loss). The charges were partly offset by income
of US$1.8 million generated through
the sale of a mineral royalty previously held by Acacia.
Finance expense and income
Finance expense of US$5.5 million
for H1 2017 was in line with H1 2016 (US$5.4
million). The key components were borrowing costs relating
to the Bulyanhulu CIL facility (US$1.6
million) which were lower than the prior year due to a lower
outstanding facility following repayments, lower accretion expenses
of US$1.7 million relating to the
discounting of the environmental reclamation liability and
US$1.5 million relating to the
servicing of the US$150 million
undrawn revolving credit facility. Other costs include bank charges
and interest on finance leases.
Finance income relates predominantly to interest charged on
non-current receivables and interest received on money market
funds. Refer to note 8 of the condensed financial information for
details.
Taxation matters
The total income tax charge was US$37.0
million compared to the prior year expense of US$107.7 million. The current tax charge of
US$31.8 million (H1 2016:
US$64.4 million) was predominantly
made up of current year income tax for North Mara, driven by year
to date profitability, in combination with deferred tax charges of
US$5.2 million (2016: US$43.3 million) which reflects movements in
temporary differences. The tax expense for H1 2016 of US$107.7 million included US$69.9 million relating to tax provisions raised
for historical tax disputes. The effective tax rate in H1 2017
amounted to 37% compared to 106% in H1 2016.
During H1 2017, we made provisional corporate tax payments of
US$17.3 million relating to North
Mara, which is based on the pro rata portion of North Mara’s
expected full year profitability. These provisional 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 H1 2017 we have also made a prepaid tax
payment of US$9.5 million relating to
a advance payment on 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, net earnings for H1
2017 were US$62.5 million, against
the prior year loss of US$6.1
million.
Earnings per share for H1 2017 amounted to US15.3 cents, an
increase of US16.8 cents from the prior year loss per share of
US1.5 cents. The increase was driven by the higher earnings, with
no change in the underlying issued shares.
Adjusted net earnings and adjusted
earnings per share
Adjusted net earnings for the first half was US$65.9 million compared to US$58.8 million in H1 2016. Net earnings in the
periods as described above have been adjusted for the impact of
items such as prior year tax provisions, discounting of indirect
tax receivables, restructuring costs, insurance proceeds as well as
legal settlements. Refer to page 30 for reconciliation between net
profit and adjusted net earnings.
Adjusted earnings per share for H1 2017 amounted to US16.1
cents, an increase of US1.8 cents from H1 2016 adjusted earnings
per share of US14.3 cents.
Financial position
Acacia had cash and cash equivalents on hand of US$175.9 million as at 30
June 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 repayment amounting to US$14.2 million in total was made. At
30 June 2017, the outstanding capital
balance is US$85.2 million
(30 June 2016: US$113.6 million).
The above complements the existing undrawn revolving credit
facility of US$150 million, which
runs until November 2019.
The net book value of property, plant and equipment increased
from US$1.41 billion as at
30 June 2016 to US$1.47 billion as at 30
June 2017. The main capital expenditure drivers have been
explained above, and have been offset by depreciation charges of
US$69.7 million. Refer to note 12 to
the condensed financial information for further details.
The current portion of inventories increased from US$195.7 million as at 30
June 2016 to US$280.7 million
as at 30 June 2017. This was mainly
due to an increase of US$83.6 million
relating to finished goods. Total gold ounces on hand of 138,113
ounces as at 30 June 2017 comprised
126,931 ounces of gold in concentrate and 11,202 ounces of gold in
doré.
Total indirect tax receivables increased from US$136.4 million as at 31
December 2016 to US$165.5
million as at 30 June 2017.
The increase was mainly due to no VAT refunds received as a result
of ongoing audits by the Tanzanian Revenue Authority on submitted
VAT returns. Our gross increase in receivables, before the
corporate tax prepayment offset, amounted to approximately
US$47 million. This was partly offset
by corporate tax prepayments of US$17.3
million and revaluation losses with the net increase in
receivables being US$29.1
million.
The net deferred tax position was a liability of US$156.8 million as at 30
June 2016 compared to the liability of US$152.1 million as at 31
December 2016. This was mainly as a result of temporary
difference at Buzwagi during the current period.
Net assets increased from US$1.86
billion as at 31 December 2016
to US$1.90 billion as at 30 June 2017. The increase reflects the current
year income of US$62.5 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 30 June |
|
Six months ended 30 June |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Cash
(used in)/ generated from operating activities |
(23,909) |
104,864 |
|
1,315 |
157,096 |
Cash
used in investing activities |
(47,250) |
(46,347) |
|
(94,786) |
(80,272) |
Cash
used in financing activities |
(34,447) |
(11,490) |
|
(48,585) |
(25,690) |
(Decrease)/ increase in cash |
(105,606) |
47,027 |
|
(142,056) |
51,134 |
Foreign exchange difference on cash |
50 |
(99) |
|
151 |
(45) |
Opening cash balance |
281,442 |
237,429 |
|
317,791 |
233,268 |
Closing cash balance |
175,886 |
284,357 |
|
175,886 |
284,357 |
Cash flow from operating activities was US$1.3 million for H1 2017, a decrease of
US$155.8 million from H1 2016
(US$157.1 million). The decrease
relates to unfavourable working capital outflows of US$159.7 million compared to outflows of
US$16.3 million in H1 2016,
provisional income tax paid of US$17.3
million and a US$9.5 million
corporate tax dispute deposit included in other current assets,
compared to total tax payments of US$10
million in H1 2016 combined with the impact of lower
operating profit mainly due to lost margins on lower gold sales
volumes (US$10.7 million). This was
offset by the impact of lower non-cash expenses of US$8.2 million which include unrealised gains on
derivatives of US$2.4 million and
foreign exchange differences of US$4.6
million.
The working capital outflow relates to a net increase in
inventories on hand of US$113.2
million driven by the higher production base and lower sales
volumes, and a net increase in indirect tax receivables on a cash
basis of approximately US$30.0
million.
Cash flow used in investing activities was US$94.8 million for H1 2017, an increase of 18%
when compared to H1 2016 (US$80.3
million), driven by higher capitalised development at both
North Mara and Bulyanhulu, partly offset by lower sustaining
capital expenditure at Bulyanhulu and Buzwagi.
A breakdown of total capital and other investing capital
activities for 2017 is provided below:
(US$’000) |
|
|
Six months ended 30 June |
(Unaudited) |
|
|
2017 |
2016 |
|
|
|
|
|
Sustaining
capital |
|
|
(30,204) |
(21,906) |
Capitalised
development |
|
|
(64,337) |
(59,489) |
Expansionary
capital |
|
|
(5,523) |
(1,211) |
Total cash
capital |
|
|
(100,064) |
(82,606) |
Non-current asset
movement1 |
|
|
5,278 |
2,334 |
Cash used in investing
activities |
|
|
(94,786) |
(80,272) |
Capital expenditure
reconciliation: |
|
|
|
|
Total cash
capital |
|
|
100,064 |
82,606 |
Land purchases |
|
|
1,247 |
2,824 |
Movement in capital
accruals |
|
|
(8,855) |
(258) |
Capital
expenditure |
|
|
92,456 |
85,172 |
Land purchases
classified as long term prepayments |
|
|
(1,247) |
(2,824) |
Non-cash
rehabilitation asset adjustment |
|
|
134 |
19,196 |
Total capital
expenditure per segment note |
|
|
91,343 |
101,544 |
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 mobile
equipment and component change-outs (US$6.6
million), investment in fixed equipment and mining
infrastructure including the West fan upgrade and underground
ventilation raise boring at Bulyanhulu (US$9.7 million) and other sustaining capital
expenditure across sites of US$13.9
million. During the first half, capital accruals from
December 2016 of US$8.9 million were paid.
Capitalised development
Capitalised development includes North Mara capitalised
stripping costs (US$25.9 million) and
capitalised underground development (US$7.4
million) and Bulyanhulu capitalised underground development
costs (US$31.1 million).
Expansionary capital
Expansionary capital expenditure consisted mainly of capitalised
expansion drilling at North Mara (US$4.5
million) and Bulyanhulu (US$1.0
million).
Non-cash capital
Non-cash capital was a negative US$8.8
million and consisted mainly of a decrease in capital
accruals (US$8.9 million) and
reclamation asset adjustments (US$0.1
million). The reclamation adjustments were driven by changes
in US risk free rates driving changes in discount rates and closure
costs assumptions.
Other investing capital
During H1 2017 North Mara incurred land purchases totalling
US$1.2 million (H1 2016: US$2.8 million).
Cash flow used in financing activities for H1 2017 of
US$48.6 million, an increase of
US$22.9 million from US$25.7 million in H1 2016. The outflow relates
to payment of the final 2016 dividend of US$34.4 million and the payment of the
4th instalment of the borrowings related to the
Bulyanhulu CIL facility totalling US$14.2
million.
Dividend
The final 2016 dividend of US8.4 cents per share was paid to
shareholders on 25 May 2017. The
Board of Directors have not recommended an interim dividend for
2017 as a result of the negative free cashflow generation over H1
2017, in line with our dividend policy.
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; and
- Determination of fair value of share options and cash-settled
share-based payments.
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$000) |
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Gold
revenue |
160,231 |
272,728 |
|
385,859 |
484,614 |
Less:
Realised gold hedge losses |
- |
- |
|
- |
- |
Net
gold revenue |
160,231 |
272,728 |
|
385,859 |
484,614 |
Gold
sold (ounces) |
127,694 |
216,782 |
|
312,438 |
400,963 |
Net
average realised gold price (US$/ounce) |
1,255 |
1,258 |
|
1,235 |
1,209 |
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.
(US$'000) |
|
|
Three months ended 30 June |
|
Six months ended 30 June |
(Unaudited) |
|
|
2017 |
2016 |
|
2017 |
2016 |
Total
cost of sales |
|
|
94,571 |
183,539 |
|
243,967 |
355,439 |
Deduct: depreciation and amortisation* |
|
|
(23,417) |
(43,166) |
|
(57,959) |
(78,376) |
Deduct: Co-product revenue |
|
|
2,468 |
(11,309) |
|
(5,805) |
(20,333) |
Total
cash cost |
|
|
73,622 |
129,064 |
|
180,203 |
256,730 |
|
|
|
|
|
|
|
|
Total
ounces sold |
|
|
127,694 |
216,782 |
|
312,438 |
400,963 |
Total
cash cost per ounce sold |
|
|
577 |
595 |
|
577 |
640 |
* Depreciation and amortisation includes the depreciation
component of the cost of inventory sold
All-in sustaining cost (AISC) is a non-IFRS financial measure.
The measure is in accordance with the World Gold Council’s guidance
issued in June 2013. It is calculated
by taking cash cost per ounce sold and adding corporate
administration costs, share-based payments, reclamation and
remediation costs for operating mines, corporate social
responsibility expenses, mine exploration and study costs, realised
gains and/or losses on operating hedges, capitalised stripping and
underground development costs and sustaining capital expenditure.
This is then divided by the total ounces sold. A reconciliation
between cash cost per ounce sold and AISC for the key business
segments is presented below:
(Unaudited) |
Three months ended 30 June 2017 |
|
Three months ended 30 June 2016 |
(US$/oz sold) |
Bulyanhulu |
North
Mara |
Buzwagi |
Group* |
|
Bulyanhulu |
North
Mara |
Buzwagi |
Group* |
Cash
cost per ounce sold |
813 |
476 |
705 |
577 |
|
662 |
382 |
948 |
595 |
Corporate administration |
44 |
21 |
81 |
46 |
|
16 |
17 |
23 |
21 |
Share
based payments |
(38) |
(13) |
(78) |
(143) |
|
15 |
8 |
14 |
72 |
Rehabilitation |
23 |
10 |
11 |
13 |
|
8 |
9 |
2 |
7 |
CSR
expenses |
9 |
10 |
(3) |
12 |
|
7 |
7 |
6 |
8 |
Capitalised development |
547 |
184 |
- |
239 |
|
195 |
203 |
- |
160 |
Sustaining capital |
160 |
70 |
46 |
91 |
|
55 |
81 |
26 |
63 |
Total
AISC |
1,558 |
758 |
762 |
835 |
|
958 |
707 |
1,019 |
926 |
* The group total includes a credit
of US$95/oz of unallocated corporate
related costs in Q2 2017, and a cost of US$66/oz in Q2 2016.
(Unaudited) |
Six months ended 30 June 2017 |
|
Six months ended 30 June 2016 |
(US$/oz sold) |
Bulyanhulu |
North
Mara |
Buzwagi |
Group* |
|
Bulyanhulu |
North
Mara |
Buzwagi |
Group* |
Cash
cost per ounce sold |
795 |
441 |
697 |
577 |
|
661 |
427 |
1,052 |
640 |
Corporate administration |
36 |
23 |
48 |
40 |
|
21 |
24 |
25 |
24 |
Share
based payments |
(4) |
(2) |
(6) |
(25) |
|
11 |
7 |
11 |
49 |
Rehabilitation |
16 |
10 |
7 |
11 |
|
7 |
9 |
3 |
7 |
CSR
expenses |
8 |
8 |
7 |
12 |
|
5 |
11 |
7 |
12 |
Capitalised development |
382 |
187 |
- |
206 |
|
189 |
183 |
0 |
148 |
Sustaining capital |
107 |
69 |
17 |
72 |
|
76 |
59 |
26 |
61 |
Total
AISC |
1,340 |
736 |
770 |
893 |
|
970 |
720 |
1,124 |
941 |
* The group total includes a credit
of US$5/oz of unallocated corporate
related costs in H1 2017, and a cost of US$46/oz in H1 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 30 June |
|
Six months ended 30 June |
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Net
profit/(loss) for the period |
35,716 |
46,282 |
|
62,543 |
(6,128) |
Plus
income tax expense/(credit) |
17,819 |
27,567 |
|
37,002 |
107,744 |
Plus
depreciation and amortisation |
23,417 |
43,166 |
|
57,959 |
78,376 |
Plus
finance expense |
3,216 |
2,514 |
|
5,454 |
5,380 |
Less
finance income |
(946) |
(197) |
|
(1,543) |
(490) |
EBITDA |
79,222 |
119,332 |
|
161,415 |
184,882 |
*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 (c) 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 30 June |
|
Six months ended 30 June |
|
(Unaudited) |
2017 |
2016 |
|
2017 |
2016 |
Net
earnings/(loss) |
35,716 |
46,282 |
|
62,543 |
(6,128) |
Adjusted for: |
|
|
|
|
|
Restructuring cost (a) |
2,477 |
1,264 |
|
3,304 |
2,125 |
Discounting of indirect taxes (b) |
- |
(6,508) |
|
- |
(6,508) |
One-off legal settlements (c) |
1,500 |
- |
|
1,500 |
- |
Prior
year tax positions recognised 1 |
- |
- |
|
- |
69,916 |
Tax
impact of the above |
(1,193) |
(379) |
|
(1,441) |
(638) |
Adjusted net earnings |
38,500 |
40,659 |
|
65,906 |
58,767 |
1 For the Six months ended 30
June 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.
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
We have made a number of further developments in the
identification and management of our risk profile over the course
of H1 2017. Where appropriate, risk ratings have been reviewed
against risk management controls and other mitigating factors. Our
principal risks continue to fall within four broad categories:
strategic risks, financial risks, external risks and operational
risks. Whilst the overall makeup of our principal risks has not
significantly changed from that published in the 2016 Annual
Report, there have been changes in certain risk profiles.
Developments such as the ban on the export of gold/copper
concentrate and the recent enacting of Tanzanian legislation
relating to the legal and regulatory framework governing the
natural resources sector have resulted in increases to the impact
rating of certain risks.
As a result of our mid-year assessment, at this stage we believe
it appropriate to include a new risk as a principal risk for the
remainder of 2017 relating to cyber security. The likelihood of
this risk has increased in the light of the increase in
cybersecurity related incidents on a global level and the potential
impact that a cyber security incident could have on the
availability and integrity of our information technology
infrastructure.
As a result of the risk review outlined above, we view our
principal risks for the remainder of 2017 as relating to the
following:
•
Political, legal and regulatory developments
•
Security, trespass and vandalism
•
Single country risk
•
Implementation of enhanced operational systems
•
Safety risks relating to mining operations
•
Equipment effectiveness
•
Environmental hazards and rehabilitation
•
Continuity of power supply
•
Significant changes to commodity prices
•
Cyber security
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.
Directors’ Responsibility
Statement
The Directors confirm that, to the best of their knowledge, the
condensed consolidated interim financial information has been
prepared in accordance with IAS 34 as adopted by the European
Union. The half-year management report includes a fair review of
the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
- an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed consolidated interim financial information, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
- material related-party transactions in the first six months of
the financial year and any material changes in the related party
transactions described in the last Annual Report.
The Directors of Acacia Mining plc are listed in the Acacia
Mining plc Annual Report for 31 December
2016, save for Mr Peter
Tomsett and Ambassador Juma
Mwapachu. A list of current Directors is maintained on the
Acacia Mining plc Group website: www.acaciamining.com.
On behalf of the Board
Brad Gordon, Chief Executive
Officer |
Kelvin Dushnisky, Chairman |
Independent review report to Acacia Mining plc
Report on the condensed consolidated interim financial
information
Our conclusion
We have reviewed Acacia Mining plc's condensed consolidated
interim financial information (the "interim financial statements")
in the interim results of Acacia Mining plc for the 6 month period
ended 30 June 2017. Based on our
review, nothing has come to our attention that causes us to believe
that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting
Standard 34, ‘Interim Financial Reporting’, as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct Authority.
Emphasis of Matter – Impact of mineral
concentrate export ban and legislative changes in Tanzania
In forming our conclusion on the interim
financial statements, which is not modified, we have considered the
adequacy of the disclosures made in note 2 to the Interim financial
statements and additional commentary within the Interim
announcement concerning the ongoing mineral concentrate export
ban and legislative changes in Tanzania. With regards to
a potential negotiated settlement of the matter, it is too early to
reliably estimate how a resolution could impact the Group’s
financial position, assets, liabilities and future cash
flows. As a consequence, these conditions, along with the
other matters explained in note 2 to the interim financial
statements, indicate the existence of a material uncertainty which
may cast significant doubt about the company’s ability to continue
as a going concern. The interim financial statements do
not include the adjustments that would result if the company was
unable to continue as a going concern.
What we have reviewed
The interim financial statements comprise:
- the consolidated balance sheet as at 30
June 2017;
- the consolidated income statement and consolidated statement of
comprehensive income for the period then ended;
- the consolidated statement of cash flows for the period then
ended;
- the consolidated statement of changes in equity for the period
then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
have been prepared in accordance with International Accounting
Standard 34, ‘Interim Financial Reporting’, as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim
financial statements and the review
Our responsibilities and those of the
directors
The interim results, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom’s Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
What a review of interim financial
statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial
Information Performed by the Independent Auditor of the Entity’
issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21 July 2017
- The maintenance and integrity of the Acacia Mining plc website
is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
- Legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Condensed Financial Information
Consolidated income statement
|
|
For the six months ended 30 June |
For the
year ended 31 December |
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
Notes |
2017 |
2016 |
2016 |
|
|
|
|
|
Revenue |
|
391,664 |
504,947 |
1,053,532 |
Cost
of sales |
|
(243,967) |
(355,439) |
(727,080) |
Gross
profit |
|
147,697 |
149,508 |
326,452 |
Corporate administration |
|
(12,520) |
(9,771) |
(21,895) |
Share-based payments |
|
7,785 |
(19,635) |
(29,929) |
Exploration and evaluation costs |
|
(16,150) |
(11,150) |
(24,020) |
Corporate social responsibility expenses |
|
(3,739) |
(4,614) |
(10,665) |
Other
(charges)/income |
7 |
(19,617) |
2,168 |
11,649 |
Profit/ (loss) before net finance expense and taxation |
|
103,456 |
106,506 |
251,592 |
Finance income |
8 |
1,543 |
490 |
1,512 |
Finance expense |
8 |
(5,454) |
(5,380) |
(11,047) |
Profit/ (loss) before taxation |
|
99,545 |
101,616 |
242,057 |
Tax
expense |
9 |
(37,002) |
(107,744) |
(147,113) |
|
|
|
|
|
Net
(loss)/ profit for the period |
|
62,543 |
(6,128) |
94,944 |
|
|
|
|
|
(Loss)/ earnings per share (cents): |
|
|
|
|
Basic
(loss)/ earnings per share (cents) |
10 |
15.3 |
(1.5) |
23.2 |
Diluted (loss)/ earnings per share (cents) |
10 |
15.2 |
(1.5) |
23.1 |
The notes on pages 41 to 58 are an integral part of this
financial information.
Consolidated statement of
comprehensive income
|
|
For the six months ended 30 June |
For the
year ended 31 December |
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
|
2017 |
2016 |
2016 |
Net
(loss)/ profit for the period |
|
62,543 |
(6,128) |
94,944 |
Other
comprehensive income: |
|
|
|
|
Items
that may be subsequently reclassified to profit or loss: |
|
|
|
|
Changes in fair value of cash flow hedges |
|
52 |
(1,226) |
7 |
Total
comprehensive (loss)/ income for the period |
|
62,595 |
(7,354) |
94,951 |
|
|
|
|
|
|
|
|
|
The notes on pages 41 to 58 are an integral part of this
financial information.
Consolidated balance sheet |
|
As
at
30 June (Unaudited) |
As at
30 June (Unaudited) |
As at
31 December (Audited) |
(US$’000) |
Notes |
2017 |
2016 |
2016 |
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill and intangible assets |
|
216,190 |
211,190 |
216,190 |
Property, plant and equipment |
12 |
1,465,309 |
1,414,194 |
1,443,176 |
Deferred tax assets |
|
3,208 |
11,416 |
8,431 |
Non-current portion of inventory |
14 |
115,775 |
87,050 |
98,936 |
Derivative financial instruments |
13 |
770 |
129 |
821 |
Other
assets |
|
58,474 |
118,197 |
63,297 |
|
|
1,859,726 |
1,842,176 |
1,830,851 |
Current assets |
|
|
|
|
Inventories |
14 |
280,692 |
195,657 |
184,313 |
Trade
and other receivables |
|
12,039 |
20,119 |
18,830 |
Derivative financial instruments |
13 |
601 |
9 |
1,343 |
Other
current assets |
15 |
190,868 |
86,230 |
149,518 |
Cash
and cash equivalents |
|
175,886 |
284,357 |
317,791 |
|
|
660,086 |
586,372 |
671,795 |
Total
assets |
|
2,519,812 |
2,428,548 |
2,502,646 |
EQUITY
AND LIABILITIES |
|
|
|
|
Share
capital and share premium |
|
929,199 |
929,199 |
929,199 |
Other
reserves |
|
961,912 |
839,505 |
933,696 |
Total
owners' equity |
|
1,891,111 |
1,768,704 |
1,862,895 |
Total
equity |
|
1,891,111 |
1,768,704 |
1,862,895 |
Non-current liabilities |
|
|
|
|
Borrowings |
16 |
56,800 |
85,200 |
71,000 |
Deferred tax liabilities |
|
148,341 |
138,751 |
148,390 |
Derivative financial instruments |
13 |
1,068 |
588 |
30 |
Provisions |
|
147,314 |
147,676 |
145,722 |
Other
non-current liabilities |
|
4,778 |
10,063 |
15,699 |
|
|
358,301 |
382,278 |
380,841 |
Current liabilities |
|
|
|
|
Trade
and other payables |
|
228,942 |
211,852 |
222,543 |
Borrowings |
16 |
28,400 |
28,400 |
28,400 |
Derivative financial instruments |
13 |
1,114 |
10,973 |
584 |
Provisions |
|
9,336 |
1,566 |
7,235 |
Other
current liabilities |
|
2,608 |
24,775 |
148 |
|
|
270,400 |
277,566 |
258,910 |
Total
liabilities |
|
628,701 |
659,844 |
639,751 |
Total equity and liabilities |
|
2,519,812 |
2,428,548 |
2,502,646 |
The notes on pages 41 to 58 are an integral part of this
financial information.
Consolidated statement of changes in
equity
|
Notes |
Share
capital |
Share
premium |
Other
distributable reserve |
Cash flow
hedging reserve |
(US$’000) |
|
|
|
|
|
Balance at 31 December 2015 (Audited) |
|
62,097 |
867,102 |
1,368,713 |
552 |
Total
comprehensive loss for the period |
|
- |
- |
- |
(1,226) |
Dividends to equity holders of the Company |
|
- |
- |
- |
- |
Share
option grants |
|
- |
- |
- |
- |
Balance at 30 June 2016 (Unaudited) |
|
62,097 |
867,102 |
1,368,713 |
(674) |
Total
comprehensive income for the period |
|
- |
- |
- |
1,233 |
Share
option grants |
|
- |
- |
- |
- |
Dividends to equity holders of the Company |
|
- |
- |
- |
- |
Balance at 31 December 2016 (Audited) |
|
62,097 |
867,102 |
1,368,713 |
559 |
Total
comprehensive loss for the period |
|
- |
- |
- |
52 |
Dividends to equity holders of the Company |
11 |
- |
- |
- |
- |
Share
option grants |
|
|
|
|
|
Balance at 30 June 2017 (Unaudited) |
|
62,097 |
867,102 |
1,368,713 |
611 |
|
Share
option reserve |
Accumulated losses |
Total
owners' equity |
Total
non- controlling interests |
Total
equity |
(US$’000) |
|
|
|
|
|
Balance at 31 December 2015 (Audited) |
3,876 |
(514,841) |
1,787,499 |
- |
1,787,499 |
Total
comprehensive loss for the period |
- |
(6,128) |
(7,354) |
- |
(7,354) |
Dividends to equity holders of the Company |
- |
(11,490) |
(11,490) |
- |
(11,490) |
Share
option grants |
49 |
- |
49 |
- |
49 |
Balance at 30 June 2016 (Unaudited) |
3,925 |
(532,459) |
1,768,704 |
- |
1,768,704 |
Total
comprehensive income for the period |
- |
101,072 |
102,305 |
- |
102,305 |
Share
option grants |
28 |
- |
28 |
- |
28 |
Dividends to equity holders of the Company |
- |
(8,142) |
(8,142) |
- |
(8,142) |
Balance at 31 December 2016 (Audited) |
3,953 |
(439,529) |
1,862,895 |
- |
1,862,895 |
Total
comprehensive loss for the period |
- |
62,543 |
62,595 |
- |
62,595 |
Dividends to equity holders of the Company |
- |
(34,385) |
(34,385) |
- |
(34,385) |
Share
option grants |
6 |
|
6 |
|
6 |
Balance at 30 June 2017 (Unaudited) |
3,959 |
(411,371) |
1,891,111 |
- |
1,891,111 |
The notes on pages 41 to 58 are an integral part of this
financial information.
Consolidated statement of cash
flows
|
|
For the six months ended
30 June |
For the
year ended
31 December |
(US$’000) |
Notes |
(Unaudited)
2017 |
(Unaudited)
2016 |
(Audited)
2016 |
Cash
flows from operating activities |
|
|
|
|
Net
(loss)/ profit for the period |
|
62,543 |
(6,128) |
94,944 |
Adjustments for: |
|
|
|
|
Tax expense |
|
37,002 |
107,744 |
147,113 |
Depreciation and amortisation |
|
69,722 |
79,367 |
156,301 |
Finance items |
|
3,911 |
4,890 |
9,535 |
Sale of mineral royalty |
|
(1,753) |
- |
- |
Loss/ (profit) on disposal of property, plant and equipment |
|
- |
136 |
(289) |
Working capital adjustments |
17 |
(159,697) |
(16,306) |
(58,497) |
Other
non-cash items |
17 |
(8,209) |
(8,952) |
(23,850) |
Cash
generated from operations before interest and tax |
|
3,519 |
160,751 |
325,257 |
Finance income |
|
1,543 |
490 |
1,512 |
Finance expenses |
|
(3,747) |
(4,145) |
(8,793) |
Net
cash generated by operating activities |
|
1,315 |
157,096 |
317,976 |
|
|
|
|
|
Cash
flows used in investing activities |
|
|
|
|
Purchase of property, plant and equipment |
|
(100,064) |
(82,606) |
(193,643) |
Movement in other assets |
|
3,746 |
2,529 |
6,952 |
Proceeds from sale of mineral royalty |
|
1,753 |
- |
- |
Acquired mineral interest |
|
- |
- |
(5,000) |
Other
investing activities |
|
(221) |
(195) |
6,528 |
Net
cash used in investing activities |
|
(94,786) |
(80,272) |
(185,163) |
|
|
|
|
|
Cash
flows used in financing activities |
|
|
|
|
Loans
paid |
|
(14,200) |
(14,200) |
(28,400) |
Dividends paid |
|
(34,385) |
(11,490) |
(19,632) |
Net
cash used in financing activities |
|
(48,585) |
(25,690) |
(48,032) |
|
|
|
|
|
Net
increase/ (decrease) in cash and cash equivalents |
|
(142,056) |
51,134 |
84,781 |
Net
foreign exchange difference |
|
151 |
(45) |
(258) |
Cash
and cash equivalents at the beginning of the period |
|
317,791 |
233,268 |
233,268 |
Cash and cash
equivalents at the end of the period |
|
175,886 |
284,357 |
317,791 |
|
|
|
|
|
The notes on pages 41 to 58 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 interim financial information for the
six months ended 30 June 2017 was
approved for issue by the Board of Directors of the Company on
21 July 2017. Statutory accounts for
the year ended 31 December 2016 were
approved by the Board of Directors on 7
March 2017 and delivered to the Registrar of Companies. The
report of the auditors’ on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006. The
condensed consolidated interim financial information has been
reviewed, not audited. The condensed consolidated interim financial
information does not comprise statutory accounts within the meaning
of section 434 of the Companies Act 2008.
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.
2. Basis of Preparation of the condensed interim financial
information
The condensed consolidated interim financial information for the
six months ended 30 June 2017 has
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS 34, ‘Interim
Financial Reporting’ as adopted by the European Union. The
condensed consolidated interim financial information should be read
in conjunction with the annual financial statements for the year
ended 31 December 2016, which have
been prepared in accordance with IFRS as adopted by the European
Union. The condensed consolidated interim financial information has
been prepared under the historical cost basis, as modified by the
revaluation of financial assets and financial liabilities
(including derivative instruments) at fair value through profit or
loss. The financial information is presented in US dollars (US$)
and all monetary results are rounded to the nearest thousand
(US$’000) except when otherwise indicated.
Acacia Group’s business activities, together with factors likely
to affect its future development, performance and position, are set
out in the operational and financial review sections of this
interim results release. The financial position of the Acacia
Group, its cash flows, liquidity position and borrowing facilities
are described in the operating and financial review sections of
this interim results release.
At 30 June 2017, the Group had
cash and cash equivalents of US$176
million with a further US$150
million available under the undrawn revolving credit
facility which remains in place until November 2019. Total borrowings at the end of the
period amounted to US$85 million, of
which US$28 million will be paid in
the next 12 months. Included in other current assets are amounts
due to the Group relating to indirect taxes of US$165 million which are expected to be received
or recovered within 12 months. The refunds remain dependent on
processing and payments of refunds by the Government of
Tanzania. Furthermore, included in
working capital is finished gold contained in concentrate of
approximately 127,000 ounces, approximately 8.3 million pounds of
copper contained in concentrate and approximately 107,000 ounces of
silver contained in concentrate. These contained metals are in a
condition to be sold, and will deliver revenue, net of government
royalties, of approximately US$163
million.
As set out in the other developments section on pages 2 to 5 and
further explained in the operating and financial review sections,
the current operating environment in Tanzania is challenging and there are several
uncertainties in our operating environment. In March 2017, the Government of Tanzania issued a ban on the export of all
gold/ copper concentrate and this ban remains in place. This has
resulted in the stockpiled concentrate material referred to above.
Currently, it is not clear how long this ban will remain in place.
In addition, and as set out in the same paragraphs in the other
developments section on pages 2 to 5 the Government of Tanzania has also announced some significant
changes to the laws impacting the extractive industry in late
June 2017, which have subsequently
been passed in early July 2017.
The Directors are of the opinion that these developments and
current circumstances represent ongoing challenges in terms of cash
flow generation and continued uninterrupted operation of the
Bulyanhulu and Buzwagi mines. Our third mine, North Mara, continues
to perform well and to generate free cash flow.
As explained in the other developments section, the Group has
served notices of Arbitration relating to its Bulyanhulu and
Buzwagi mines under their respective Mineral Development
Agreements. In addition, we also believe that our Mineral
Development Agreements protect us from the legislative changes
proposed. Notwithstanding these developments, we continue to
believe that a negotiated settlement of these differences with the
Tanzanian Government remains in the best interests of all parties
and we look forward to discussions commencing in the near future.
As negotiations are yet to commence the impact of a settlement on
the Group’s financial position, assets, liabilities and future cash
flows is uncertain. At the same time, management has instituted
measures to limit unnecessary expenditure and preserve cash, and
are considering a range of options to limit the impact of the above
factors; amongst others to consider halting operations at the
affected mines should it be needed.
In assessing the Acacia Group’s going concern status the
Directors have taken into account the impact of the ban on ongoing
operations as well as the following factors and assumptions; the
significant current cash position, the latest mine plans and
a range of scenarios around the various options under these
circumstances, including the impact of an extended concentrate
export ban or the impact of halting the affected mines for a period
of time, the current gold and copper prices and market expectations
for the same in the medium term, and Acacia Group’s capital
expenditure and financing plans. In addition the Directors have
assumed that the Group will repay its borrowing obligations in
accordance with the current terms of its agreement, and that
undrawn facilities continue to be available. 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 interim
financial information however have concluded that the combination
of these circumstances represents a material uncertainty that may
cast significant doubt on the Group’s ability to continue as a
going concern should the assumptions referred to above prove not to
be correct.
3. Accounting Policies
The accounting policies adopted are consistent with those used
in the Acacia Mining plc annual financial statements for the year
ended 31 December 2016. There are no
new standards, interpretations or amendments to standards issued
and effective for the period which materially impacted on the
Group. The following exchange rates to the US dollar have been
applied:
|
As
at
30 June
2016 |
Average
six months ended
30 June
2016 |
As
at
30 June
2016 |
Average
six months ended
30 June
2016 |
As
at
31 December
2016 |
Average
year ended
31 December
2016 |
South
African rand (US$:ZAR) |
13.09 |
13.20 |
14.78 |
15.40 |
13.70 |
14.66 |
Tanzanian shilling (US$:TZS) |
2,230 |
2,224 |
2,179 |
2,179 |
2,173 |
2,177 |
Australian dollars (US$:AUD) |
1.30 |
1.33 |
1.35 |
1.36 |
1.38 |
1.34 |
UK
pound (US$:GBP) |
0.59 |
0.79 |
0.76 |
0.70 |
0.81 |
0.74 |
4. Estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. In preparing these
condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group’s
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements for the year ended 31 December
2016.
5. 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 consists 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 30 June
2017, 30 June 2016 and
31 December 2016 is set out
below.
|
For the six months ended 30 June 2017 |
(Unaudited)
(US$’000,except per ounce amounts) |
North
Mara |
Bulyanhulu |
Buzwagi |
Other |
Total |
|
Gold
revenue |
220,217 |
100,023 |
65,619 |
- |
385,859 |
|
Co-product revenue |
653 |
2,760 |
2,392 |
- |
5,805 |
|
Total
segment revenue |
220,870 |
102,783 |
68,011 |
- |
391,664 |
|
Segment cash operating
cost1 |
(79,251) |
(67,344) |
(39,413) |
0 |
(186,008) |
|
Corporate
administration and exploration |
(4,181) |
(2,937) |
(2,559) |
(18,992) |
(28,669) |
|
Other charges and
corporate social responsibility expenses |
(3,843) |
(902) |
(6,099) |
(4,728) |
(15,572) |
|
EBITDA2 |
133,595 |
31,600 |
19,940 |
(23,720) |
161,415 |
|
Depreciation and
amortisation4 |
(29,009) |
(26,940) |
(1,777) |
(233) |
(57,959) |
|
EBIT2 |
104,586 |
4,660 |
18,163 |
(23,953) |
103,456 |
|
Finance income |
|
|
|
|
1,543 |
|
Finance expense |
|
|
|
|
(5,454) |
|
Profit
before taxation |
|
|
|
|
99,545 |
|
Tax expense |
|
|
|
|
(37,002) |
|
Net
profit for the period |
|
|
|
|
62,543 |
|
Capital expenditure: |
|
|
|
|
|
|
Sustaining |
10,930 |
8,599 |
865 |
957 |
21,351 |
|
Expansionary |
4,489 |
982 |
- |
51 |
5,522 |
|
Capitalised development |
33,282 |
31,054 |
- |
- |
64,336 |
|
|
48,701 |
40,635 |
865 |
1,008 |
91,209 |
|
Non-cash capital expenditure adjustments |
|
|
|
|
|
|
Reclamation asset adjustment |
(56) |
191 |
(1) |
- |
134 |
|
Other
non-cash capital expenditure |
- |
- |
- |
(1) |
(1) |
|
Total
capital expenditure |
48,645 |
40,826 |
864 |
1,007 |
91,342 |
|
Segmental cash operating cost |
79,251 |
67,344 |
39,413 |
- |
186,008 |
|
Deduct: co-product revenue |
(654) |
(2,760) |
(2,392) |
- |
(5,806) |
|
Total
cash costs |
78,597 |
64,584 |
37,021 |
- |
180,202 |
|
Sold
ounces |
178,130 |
81,214 |
53,094 |
- |
312,438 |
|
Cash cost per ounce
sold2 |
441 |
795 |
697 |
|
577 |
|
Corporate administration charges |
23 |
36 |
48 |
9 |
40 |
|
Share-based payments |
(2) |
(4) |
(6) |
(22) |
(25) |
|
Rehabilitation - accretion and depreciation |
10 |
16 |
7 |
- |
11 |
|
Corporate social responsibility expenses |
8 |
8 |
7 |
4 |
12 |
|
Capitalised stripping/ UG development |
187 |
382 |
- |
- |
206 |
|
Sustaining capital expenditure |
69 |
107 |
17 |
3 |
72 |
|
All-in sustaining cost
per ounce sold2 |
736 |
1,340 |
770 |
(6) |
893 |
|
Segment carrying
value3 |
294,744 |
1,281,208 |
142,280 |
97,233 |
1,815,465 |
|
|
For the six months ended 30 June 2016 |
(Unaudited)
(US$’000,except per ounce amounts) |
North
Mara |
Bulyanhulu |
Buzwagi |
Other |
Total |
|
Gold
revenue |
203,788 |
182,872 |
97,954 |
- |
484,614 |
|
Co-product revenue |
366 |
8,188 |
11,779 |
- |
20,333 |
|
Total
segment revenue |
204,154 |
191,060 |
109,733 |
- |
504,947 |
|
Segment cash operating
cost1 |
(72,895) |
(107,842) |
(96,326) |
- |
(277,063) |
|
Corporate
administration and exploration |
(5,443) |
(6,273) |
(2,847) |
(25,993) |
(40,556) |
|
Other charges and
corporate social responsibility expenses |
3,158 |
(2,651) |
(1,725) |
(1,228) |
(2,446) |
|
EBITDA2 |
128,974 |
74,294 |
8,835 |
(27,221) |
184,882 |
|
Depreciation and
amortisation4 |
(29,346) |
(41,107) |
(6,869) |
(1,054) |
(78,376) |
|
EBIT2 |
99,628 |
33,187 |
1,966 |
(28,275) |
106,506 |
|
Finance income |
|
|
|
|
490 |
|
Finance expense |
|
|
|
|
(5,380) |
|
Profit
before taxation |
|
|
|
|
101,616 |
|
Tax expense |
|
|
|
|
(107,744) |
|
Net
loss for the period |
|
|
|
|
(6,128) |
|
|
|
|
|
|
|
|
Capital expenditure: |
|
|
|
|
|
|
Sustaining |
7,257 |
11,506 |
2,231 |
654 |
21,648 |
|
Expansionary |
458 |
753 |
- |
- |
1,211 |
|
Capitalised development |
31,051 |
28,438 |
- |
- |
59,489 |
|
|
38,766 |
40,697 |
2,231 |
654 |
82,348 |
|
Non-cash capital expenditure adjustments |
|
|
|
|
|
|
Reclamation asset adjustment |
6,252 |
9,937 |
3,007 |
- |
19,196 |
|
Total
capital expenditure |
45,018 |
50,634 |
5,238 |
654 |
101,544 |
|
|
|
|
|
|
|
|
Segmental cash operating cost |
72,895 |
107,842 |
96,326 |
|
277,063 |
|
Deduct: co-product revenue |
(366) |
(8,188) |
(11,779) |
|
(20,333) |
|
Total
cash costs |
72,529 |
99,654 |
84,547 |
|
256,730 |
|
Sold
ounces |
169,840 |
150,719 |
80,404 |
|
400,963 |
|
Cash cost per ounce
sold2 |
427 |
661 |
1,052 |
|
640 |
|
Corporate administration charges |
24 |
21 |
25 |
|
24 |
|
Share-based payments |
7 |
11 |
11 |
|
49 |
|
Rehabilitation - accretion and depreciation |
9 |
7 |
3 |
|
7 |
|
Corporate social responsibility expenses |
11 |
5 |
7 |
|
12 |
|
Capitalised stripping/ UG development |
183 |
189 |
- |
|
148 |
|
Sustaining capital expenditure |
59 |
76 |
26 |
|
61 |
|
All-in sustaining cost
per ounce sold2 |
720 |
970 |
1,124 |
|
941 |
|
|
|
|
|
|
|
|
Segment carrying
value3 |
262,260 |
1,214,729 |
71,676 |
62,764 |
1,611,429 |
|
|
For the year ended 31 December 2016 |
(Audited)
(US$’000,except per ounce amounts) |
North
Mara |
Bulyanhulu |
Buzwagi |
Other |
Total |
|
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) |
|
Corporate
administration and exploration |
(8,251) |
(9,507) |
(4,176) |
(23,191) |
(45,915) |
|
Other charges and
corporate social responsibility expenses |
(2,918) |
(3,960) |
(3,011) |
(20,874) |
(30,763) |
|
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) |
|
Loss
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 adjustment |
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 charges |
21 |
21 |
26 |
|
27 |
|
Share-based payments |
2 |
2 |
3 |
|
37 |
|
Rehabilitation - accretion and depreciation |
9 |
7 |
3 |
|
7 |
|
Corporate social responsibility expenses |
15 |
6 |
10 |
|
13 |
|
Capitalised stripping/ UG development |
201 |
226 |
- |
|
170 |
|
Sustaining capital expenditure |
75 |
74 |
22 |
|
64 |
|
All-in sustaining cost
per ounce sold2 |
733 |
1,058 |
1,095 |
|
958 |
|
|
|
|
|
|
|
|
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 28 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 includes the depreciation component of the cost of
inventory sold.
6. Impairment Assessment
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.
As previously reported, and as
discussed in the other developments and operating and finance
reviews of this interim financial results release, the Government
of Tanzania announced a ban on the
export of gold/copper concentrate in March
2017. Subsequently, during the second quarter two
Presidential Committees reported their findings following
investigations into the technical and economic aspects of the
historic exports of gold/copper concentrates. Acacia fully refutes
the implausible findings of both committees which claim that Acacia
and its predecessor companies have historically significantly
under-declared the contents of exports of concentrate which has led
to an under-declaration of taxes running into the tens of billions
of dollars. Acacia re-iterates 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. Discussions to find a mutually beneficial solution
to these issues are expected to start early in Q3 2017.
The above has had a negative impact on
the operating environment of Acacia and the three mines it operates
in Tanzania. These changes, in
combination with the ban imposed and proposed legislative changes
have been identified by management as potential triggers for an
impairment assessment.
As a result of the above, a review for
impairment of the affected cash generating units (“CGU”) has been
performed. The review compared the recoverable amount of assets for
the CGU to the carrying value of the CGU’s 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 CGU’s. 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. The
expected future cash flows utilised in the NPV model are derived
from estimates of projected future revenues, future cash costs of
production and capital expenditures contained in the life-of-mine
(“LOM”) plan for each CGU. The Group’s LOM plans reflect proven and
probable reserves, assume limited resource conversion, and are
based on detailed research, analysis and modelling to optimise the
internal rate of return for each CGU.
The discount rate applied to calculate
the present value is based upon the real weighted average cost of
capital applicable to the CGU. The discount rate reflects equity
risk premiums over the risk-free rate, the impact of the remaining
economic life of the CGU and the risks associated with the relevant
cash flows based on the country in which the CGU is located. These
risk adjustments are based on observed equity risk premiums,
historical country risk premiums and average credit default swap
spreads for the period.
The key economic assumptions used in
the reviews during 2017 and 2016 were:
|
For the
6 months ended
30 June |
For the
year ended
31 December |
|
2017 |
2016 |
Gold
price per ounce (2017) |
US$1,200 |
US$1,200 |
Gold
price per ounce(Long term) |
US$1,200 |
US$1,200 |
Copper
price per pound |
US$2.50 |
US$2.25 |
South
African Rand (US$:ZAR) |
14 |
14 |
Tanzanian Shilling (US$:TZS) |
2,100 |
2,150 |
Long-term oil price per barrel |
US$60 |
US$60 |
Discount rate |
5% |
5% |
NPV
multiples |
1 |
1 |
Our assessment took into account the impact of the current ban
on the export of gold/ copper concentrate as well as the increased
royalty rate and export clearing fees announced in June 2017 on cash flows generated by each
affected CGU.
As a result of the impairment assessment performed, no
impairment charge was recorded for the six months ended
30 June 2017.
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 and
discount rates. 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$100 per ounce, and an increase in the discount
rate of 1%.
Neither of the reasonably possible changes set out above would
result in an impairment. This sensitivity analysis also does not
take into account any of management’s mitigation factors should
these changes occur.
Our review assumed that negotiations around resolving the
current in-country matters are resolved. Should this not be the
case, a carrying value assessment review will be performed again,
and this might or might not result in the recognition of impairment
losses.
7. Other Charges
|
For the six months ended 30 June |
For the
year ended
31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
2017 |
2016 |
2016 |
Other
expenses |
|
|
|
Operational Review costs (including restructuring cost) |
3,304 |
2,125 |
7,689 |
Foreign exchange losses |
4,583 |
- |
- |
Disallowed indirect taxes |
615 |
938 |
1,447 |
Unrealised non-hedge derivative losses |
2,431 |
- |
- |
Legal costs |
4,601 |
667 |
2,641 |
One off legal settlements |
1,500 |
- |
- |
Government levies and charges |
535 |
- |
- |
Loss on disposal of property, plant and equipment |
- |
136 |
- |
Other |
3,801 |
2,782 |
4,259 |
Total |
21,370 |
6,648 |
16,036 |
|
|
|
|
Other
income |
|
|
|
Discounting of indirect tax receivables |
- |
(6,508) |
(9,719) |
Profit on disposal of property, plant and equipment |
- |
- |
(289) |
Unrealised non-hedge derivative gains |
- |
(1,352) |
(13,031) |
Insurance proceeds |
- |
- |
(3,455) |
Foreign exchange gains |
- |
(956) |
(1,137) |
Sale
of mineral royalty |
(1,753) |
- |
- |
Other |
- |
- |
(54) |
Total |
(1,753) |
(8,816) |
(27,685) |
|
|
|
|
Total
other income/(charges) |
19,617 |
(2,168) |
(11,649) |
8. Finance Income and Expenses
a)Finance income
|
For the six months ended 30 June |
For the
year ended
31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
2017 |
2016 |
2016 |
Interest on time deposits |
1,443 |
403 |
1,236 |
Other |
100 |
87 |
276 |
Total |
1,543 |
490 |
1,512 |
b) Finance expense
|
For the six months ended 30 June |
For the
year ended
31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
2017 |
2016 |
2016 |
Unwinding of discount1 |
1,708 |
1,235 |
2,254 |
Revolving credit facility charges2 |
1,151 |
1,087 |
2,279 |
Interest on CIL facility |
1,573 |
1,896 |
3,956 |
Interest on finance leases |
200 |
199 |
- |
Bank
charges |
319 |
604 |
701 |
Other |
503 |
359 |
1,857 |
Total |
5,454 |
5,380 |
11,047 |
- The unwinding of discount is calculated on the
environmental rehabilitation provision.
- 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.
9. Tax Expense
|
For the six months ended 30 June |
For the
year ended
31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
2017 |
2016 |
2016 |
Current tax: |
|
|
|
Current tax on profits for the period |
31,793 |
27,843 |
54,508 |
Adjustments in respect of prior years1 |
0 |
36,6041 |
36,697 |
Total
current tax |
31,793 |
64,447 |
91,205 |
Deferred tax: |
|
|
|
Origination and reversal of temporary differences2 |
5,209 |
43,2972 |
55,908 |
Total
deferred tax |
5,209 |
43,297 |
55,908 |
Income
tax expense |
37,002 |
107,744 |
147,113 |
1 Included in this amount for 2016 is a provision for
uncertain tax positions of US$32.3
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 this amount for 2016 is a provision for
uncertain tax positions of US$35.0
million relating to Bulyanhulu following an adverse tax
ruling, as reported in Q1 2016.
The tax on the Group’s profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to the profits of the consolidated entities as
follows:
|
For the six months ended 30 June |
For the
year ended 31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
2017 |
2016 |
2016 |
Profit/(loss) before tax |
99,545 |
101,616 |
242,057 |
Tax calculated at
domestic tax rates applicable to profits in the respective
countries |
30,519 |
28,481 |
73,373 |
Tax
effects of: |
|
|
|
Expenses not deductible for tax purposes |
57 |
463 |
247 |
Tax losses for which
no deferred income tax asset was recognised3 |
6,426 |
7,100 |
76,592 |
Adjustments to unrecognised tax benefits carried
forward4 |
- |
69,916 |
- |
Prior
year adjustments |
- |
1,784 |
(3,099) |
Tax
charge |
37,002 |
107,744 |
147,113 |
3 The reconciliation includes an amount of US$69.9 million for 2016 relating to an increase
in the amount of unrecognised tax liabilities carried forward. The
adjustment reflects uncertainty regarding recoverability of certain
tax losses, and gives rise to an increased deferred tax
charge.
Tax periods remain open to review by the Tanzanian Revenue
Authority (TRA) in respect of income taxes for five years following
the date of the filing of the corporate tax return, during which
time the authorities have the right to raise additional tax
assessments including penalties and interest. Under certain
circumstances the reviews may cover longer periods. Because a
number of tax periods remain open to review by tax authorities,
there is a risk that transactions that have not been challenged in
the past by the authorities may be challenged by them in the
future, and this may result in the raising of additional tax
assessments plus penalties and interest.
10. (Loss)/ earnings Per Share (EPS)
Basic EPS is calculated by dividing the net (loss)/ profit for
the period attributable to owners of the Company by the weighted
average number of Ordinary Shares in issue during the year.
Diluted earnings per share is calculated by adjusting the
weighted average number of Ordinary Shares outstanding to assume
conversion of all dilutive potential Ordinary Shares. The Company
has dilutive potential Ordinary Shares in the form of stock
options. The weighted average number of shares is adjusted for the
number of shares granted assuming the exercise of stock
options.
At 30 June 2017, 30 June 2016 and 31
December 2016, (loss)/ earnings per share have been
calculated as follows:
|
For the six months ended
30 June |
For the year ended
31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
|
(US$’000) |
2017 |
2016 |
2016 |
|
(Loss)/ earnings |
|
|
|
Net
(loss)/ profit attributable to owners of the parent |
62,543 |
(6,128) |
94,944 |
|
|
|
|
Weighted average number of Ordinary Shares in issue |
410,085,499 |
410,085,499 |
410,085,499 |
Adjusted for dilutive effect of stock options |
382,474 |
277,889 |
355,514 |
Weighted
average number of Ordinary Shares for diluted earnings per
share |
410,467,973 |
410,363,388 |
410,441,013 |
|
|
|
|
(Loss)/ earnings per share |
|
|
|
Basic (loss)/ earnings per share (cents) |
15.3 |
(1.5) |
23.2 |
Dilutive (loss)/ earnings per share (cents) |
15.2 |
(1.5) |
23.1 |
|
|
|
|
|
|
|
|
11. Dividends
The final dividend declared in respect of the year ended
31 December 2016 of US$34.4 million (US0.8 cents per share) was paid
during May 2017. No 2017 interim
dividend has been declared based on the Group’s year-to-date
negative free cash flow.
12. Property, Plant and Equipment
For the six months
ended 30 June 2017 (Unaudited)
(US$’000) |
Plant
and equipment |
Mineral
properties and mine development costs |
Assets
under construction¹ |
Total |
At 1 January 2017, net
of accumulated depreciation and impairment |
553,993 |
842,019 |
47,164 |
1,443,176 |
Additions |
- |
- |
91,209 |
91,209 |
Non-cash reclamation asset adjustments |
- |
- |
134 |
134 |
Foreign currency translation adjustments |
512 |
- |
- |
512 |
Disposals/write-downs |
- |
- |
- |
- |
Depreciation |
(37,854) |
(31,868) |
- |
(69,722) |
Transfers between categories |
21,373 |
74,511 |
(95,884) |
- |
At 30
June 2017 |
538,024 |
884,662 |
42,623 |
1,465,309 |
|
|
|
|
|
At 1
January 2017 |
|
|
|
|
Cost |
1,914,522 |
1,777,277 |
47,164 |
3,738,963 |
Accumulated depreciation and impairment |
(1,360,529) |
(935,258) |
- |
(2,295,787) |
Net
carrying amount |
553,993 |
842,019 |
47,164 |
1,443,176 |
|
|
|
|
|
At 30
June 2017 |
|
|
|
|
Cost |
1,936,407 |
1,851,788 |
42,623 |
3,830,818 |
Accumulated depreciation and impairment |
(1,398,383) |
(967,126) |
- |
(2,365,509) |
Net
carrying amount |
538,024 |
884,662 |
42,623 |
1,465,309 |
For the six months
ended 30 June 2016 (Unaudited)
(US$’000) |
Plant and equipment |
Mineral properties and mine development costs |
Assets under construction¹ |
Total |
At 1 January 2016, net
of accumulated depreciation and impairment |
572,877 |
761,592 |
56,244 |
1,390,713 |
Additions |
- |
- |
82,348 |
82,348 |
Non-cash reclamation asset adjustments |
- |
- |
19,196 |
19,196 |
Foreign currency translation adjustments |
1,441 |
- |
- |
1,441 |
Disposals/write-downs |
(137) |
- |
- |
(137) |
Depreciation |
(49,362) |
(30,005) |
- |
(79,367) |
Transfers between categories |
41,169 |
60,801 |
(101,970) |
- |
At 30
June 2016 |
565,988 |
792,388 |
55,818 |
1,414,194 |
|
|
|
|
|
At 1
January 2016 |
|
|
|
|
Cost |
1,845,234 |
1,636,413 |
56,244 |
3,537,891 |
Accumulated depreciation and impairment |
(1,272,357) |
(874,821) |
- |
(2,147,178) |
Net
carrying amount |
572,877 |
761,592 |
56,244 |
1,390,713 |
|
|
|
|
|
At 30
June 2016 |
|
|
|
|
Cost |
1,887,676 |
1,697,214 |
55,818 |
3,640,708 |
Accumulated depreciation and impairment |
(1,321,688) |
(904,826) |
- |
(2,226,514) |
Net
carrying amount |
565,988 |
792,388 |
55,818 |
1,414,194 |
For the
year ended 31 December 2016
(Audited)
(US$’000) |
Plant
and equipment |
Mineral
properties and mine development costs |
Assets
under construction¹ |
Total |
At 1 January 2016, net
of accumulated depreciation and impairment |
572,877 |
761,592 |
56,244 |
1,390,713 |
Additions |
- |
- |
191,139 |
191,139 |
Non-cash reclamation asset adjustments |
- |
- |
21,955 |
21,955 |
Foreign currency translation adjustments |
2,203 |
- |
- |
2,203 |
Disposals/write-downs |
(6,533) |
- |
- |
(6,533) |
Depreciation |
(95,864) |
(60,437) |
- |
(156,301) |
Transfers between categories |
81,310 |
140,864 |
(222,174) |
- |
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 impairment |
(1,272,357) |
(874,821) |
- |
(2,147,178) |
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 impairment |
(1,360,529) |
(935,258) |
- |
(2,295,787) |
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 includes 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 includes five drill rigs
purchased under short-term finance leases.
The following amounts were included in property, plant and
equipment where the Group is a lessee under a finance lease:
|
|
For the six months ended
30 June |
For the
year ended
31 December |
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
2017 |
2016 |
2016 |
Cost - capitalised finance leases |
|
51,618 |
51,617 |
51,617 |
Accumulated depreciation and impairment |
|
(42,050) |
(36,392) |
(40,925) |
Net carrying amount |
|
9,568 |
15,225 |
10,692 |
13. Derivative Financial Instruments
The table below analyses financial instruments carried at fair
value, by valuation method. The Group has derivative financial
instruments in the form of economic and cash flow hedging contracts
which are all defined as level two instruments as they are valued
using inputs other than quoted prices that are observable for the
assets or liabilities. The following tables present the group’s
assets and liabilities that are measured at fair value at
30 June 2017, 30 June 2016 and 31
December 2016.
|
|
|
Assets |
Liabilities |
(US$’000) |
Current |
Non-current |
Current |
Non-current |
For the six months
ended 30 June 2017 (Unaudited) |
|
|
|
|
Interest contracts: Designated as cash flow hedges |
528 |
611 |
518 |
- |
Commodity contracts - Fuel: Not designated as hedges |
73 |
159 |
596 |
1,068 |
Total |
601 |
770 |
1,114 |
1,068 |
|
|
|
|
|
|
|
|
|
|
Assets |
Liabilities |
(US$’000) |
Current |
Non-current |
Current |
Non-current |
For the six months
ended 30 June 2016 (Unaudited) |
|
|
|
|
Interest contracts: Designated as cash flow hedges |
- |
- |
434 |
320 |
Currency contracts: Not designated as hedges |
- |
- |
6,761 |
- |
Commodity contracts - Fuel: Not designated as hedges |
9 |
129 |
3,778 |
268 |
Total |
9 |
129 |
10,973 |
588 |
|
|
|
|
|
|
|
|
|
|
Assets |
Liabilities |
|
(US$’000) |
Current |
Non-current |
Current |
Non-current |
|
For the year ended 31
December 2016 (Audited) |
|
|
|
|
|
Interest contracts: Designated as cash flow hedges |
33 |
255 |
73 |
- |
215 |
Commodity contracts - Fuel: Not designated as hedges |
1,310 |
566 |
511 |
30 |
1,335 |
Total |
1,343 |
821 |
584 |
30 |
1,550 |
|
|
|
|
|
|
|
|
14. Inventories
|
|
For the six months ended
30 June |
For the
year ended
31 December |
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
2017 |
2016 |
2016 |
Raw
materials |
|
|
|
|
Ore in
stockpiles |
|
14,041 |
17,733 |
8,270 |
Mine
operating supplies |
|
154,859 |
145,936 |
143,609 |
Work
in process |
|
10,807 |
14,632 |
10,534 |
Finished products |
|
|
|
|
Gold
doré/bullion |
|
7,084 |
5,424 |
8,692 |
Gold,
copper and silver concentrate |
|
93,901 |
11,932 |
13,208 |
Total
current portion of inventory |
|
280,692 |
195,657 |
184,313 |
Non-current ore in stockpiles¹ |
|
115,775 |
87,050 |
98,936 |
Total |
|
396,467 |
282,707 |
283,249 |
15. Other Current Assets
|
|
For the six months ended
30 June |
For the
year ended
31 December |
|
|
(Unaudited) |
(Unaudited) |
(Audited) |
(US$’000) |
2017 |
2016 |
2016 |
Other
current assets: |
|
|
|
|
Current portion of indirect tax receivables |
|
157,936 |
50,787 |
128,423 |
Other
receivables and advance payments1 |
|
32,932 |
35,443 |
21,095 |
Total |
|
190,868 |
86,230 |
149,518 |
1 Other receivables and advance payments relate to
prepayments for insurance and income taxes offset against
outstanding refunds for VAT and fuel levies and current amounts
receivable from the NSSF of US$2.3
million (2016: US$5.0
million).
16. 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 a
material adverse effect clauses. The interest rate has been
fixed at 3.6% through the use of an interest rate swap. The 7 year
Facility is repayable in equal $14.2
million 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 regular
repayments have been made each half year. As at 30 June 2017 the balance owing was US$85.2 million (2016: US$99.4 million) all covenants have been complied
with. Interest accrued to the value of US$0.6 million (2016: US$0.6 million) was included in accounts payable
at the end of the period. Interest incurred on the borrowings as
well as hedging losses on the interest rate swap for the period
ended 30 June 2017 was US$1.2 million (2016: US$4.0 million).
17. Cash flow – other items
a) Operating cash flows - other items
Movements relating to working capital items
|
For the six months ended
30 June |
For the
year ended
31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
2016 |
Indirect and corporate taxes1 |
(51,047) |
(13,015) |
(59,100) |
Increase in current indirect tax receivable |
(33,747) |
(3,015) |
(18,224) |
Prepaid corporate tax |
- |
(10,000) |
(20,000) |
Income tax paid |
(17,300) |
- |
(20,876) |
Other
current assets |
6,519 |
4,512 |
695 |
Trade
receivables |
6,931 |
(5,756) |
(4,472) |
Inventories2 |
(113,217) |
(7,770) |
(8,312) |
Other
liabilities |
(7,626) |
(3,027) |
33,582 |
Share
based payments3 |
(834) |
19,635 |
(35,966) |
Trade
and other payables4 |
795 |
(10,905) |
15,931 |
Other
working capital items5 |
(1,218) |
20 |
(855) |
Total |
(159,697) |
(16,306) |
(58,497) |
1 During the year, we have made US$17.3 million (US$20
million 2016) corporate tax provisional payments. This has
been funded through an offset against current indirect taxes that
was due for refund.
2 The inventory adjustment includes the movement in current
as well as the non-current portion of inventory.
3 During the year, share based payments of US$0.8 million was made.
4 The trade and other payables adjustment exclude statutory
liabilities in the form of income tax payable.
5 Other working capital items include exchange losses
associated with working capital.
Other non-cash items
|
For the six months ended
30 June |
For the
year ended
31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
2016 |
Adjustments for non-cash income statement items: |
|
|
|
Foreign exchange (gains)/losses |
4,734 |
(1,070) |
(1,463) |
Discounting of indirect tax receivables |
- |
(6,508) |
(9,719) |
Provisions settled |
2,101 |
(11) |
(8) |
Unrealised gain on derivatives |
2,431 |
(1,352) |
(13,031) |
Stock
option expense |
6 |
49 |
77 |
Provisional tax offsets |
(17,300) |
- |
- |
Other
non-cash items |
(30) |
(105) |
36 |
Exchange loss on revaluation of cash balances |
(151) |
45 |
258 |
Total |
(8,209) |
(8,952) |
(23,850) |
b) Investing cash flows - other items
|
For the six months ended
30 June |
For the
year ended
31 December |
|
(Unaudited) |
(Unaudited) |
(Audited) |
(in
thousands of United States dollars) |
2017 |
2016 |
2016 |
Proceeds on sale of property, plant and equipment |
- |
40 |
6,713 |
Other
long-term receivables |
29 |
(125) |
(10) |
Rehabilitation expenditure |
(250) |
(110) |
(175) |
18. Commitments and Contingencies
The Group is subject to various laws and regulations which, if
not observed, could give rise to penalties. As at 30 June 2017, the Group has the following
commitments and/ or contingencies.
a)
Legal contingencies
As at 30 June 2017, the Group was
a defendant in a number of lawsuits. The plaintiffs are claiming
damages and interest thereon for the loss caused by the Group 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, and the outcome of the lawsuits cannot presently be
determined. However, in the opinion of the Directors and Group’s
Legal Counsel, no material liabilities are expected to materialise
from these lawsuits that have not already been provided for.
- An adjudication claim for US$115
million by Bismark Hotel Limited relating to an alleged
breach of contract under an Option Agreement signed in 1995. The
claim relates to an application for a prospecting licence with no
attributable reserves, resources or value. We are waiting for the
adjudicators to fix a hearing date. Management are of the opinion
that the claim is without merit and that it will be successfully
defended.
- An arbitration award of US$4
million, relating to a historical arbitration between North
Mara Gold Mine Limited (NMGML) and Diamond Motors Limited (DML) in
respect of an alleged breach of contract claim in relation to the
interpretation of periodic rate review requirements
and other provisions of drilling services contracts.
NMGML counterclaimed against the amount and raised a provision of
US$6.2 million reflecting the view of
NMGML as to the proper interpretation and application of the rate
review clauses of the contracts. An arbitral tribunal decided in
favour of NMGML on the material grounds of the
claim on 10 August 2015, with an award of
US$4 million for
unpaid rates to DML for the
period up to September 2013.
The Tribunal found that the subsequent period fell to be determined
by negotiation of the parties pursuant to the contractual terms and
should be calculated based on the tribunal’s judgment. After the
Award was issued, DML: (i) sought to challenge the Award in the
Commercial Court; and (ii) filed a winding up application against
NMGML based on unpaid rates for 2014 and 2015. NMGML petitioned the
High Court to stay the winding up petition, given that the
underlying debt and alleged indebtedness for 2014/2015 must be
determined by arbitration. The stay was rejected on the basis that
winding up procedures cannot be determined by arbitration. This
decision is on appeal. DML recently applied to strike out the
appeal on the basis that the record on appeal was not timely
filed. We will be opposing this application, which may not be
heard by the Court of Appeal for some months. We are
currently assessing options available to determine the amount
payable to DML for 2014/2015 in order to reach an agreement on this
and to have all Court proceedings set aside. The hearing for
the application to wind up North Mara has yet to be scheduled.
Payment has been made for the Arbitration award (US$4 million) and we continue to carry a
provision of US$2.2 million as
provisioned for the first arbitration.
- A contractual dispute between various Acacia operating
companies and Petrolube/ISA to the value of US$35.1 million. The Acacia entities terminated
contractual supply relationships for: (i) the provision of hoses,
fittings and assembly services to operating entities by ISA on
Notice of 5 July 2016; and (ii) the
provision of lubricants and associated services by Petrolube to
operating entities on 5 July 2016, in
each case pursuant to the express termination without cause
provisions in the agreement, and following retendering of relevant
services and as a result of various breaches of contract relating
to the provision of Petrolube/ISA services (including issues
relating to reliability of prior supplies and quality of products)
and various other breaches of contract by Petrolube/ISA. The
termination of the Petrolube/ISA contracts resulted in Petrolube /
ISA commencing proceedings and procedural applications in the High
Court of Tanzania. This was
undertaken despite the contracts providing for arbitration as the
principal dispute resolution mechanism. Petrolube /ISA’s ultimate
objective was to have the termination of the agreements set aside
on the basis of unlawful termination and to recover various damages
limbs, including loss of profits, and other general damages
(US$ 56,080,878.46 – Petrolube Claim
and US$ 24,868,942.64 ISA Claim). We
have challenged all elements of these Court proceedings and have
also challenged the jurisdiction of the Court together with an
application for a stay of proceedings, given that the contracts
require all disputes to be referred to arbitration following
principal to principal dispute discussions. We have also filed
petitions to stay these amended plaints (again, on the basis of the
contractual dispute resolution process) and are waiting for these
to be determined. In conjunction with these court proceedings,
however, we have commenced separate arbitration proceedings in
accordance with the dispute resolution procedures under the
relevant contracts.
- A claim for compensation against NMGML in relation to the
destruction of an office building and stone crusher machine. The
damage to the property was caused by the Tanzanian Police Force.
The claim has been re-filed in the High Court and awaits
scheduling. Management expects to
be able to defend
the claim successfully as the damage of the property
was caused by the Tanzanian Police Force; therefore no provision
has been made.
b) 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. These include the
following:
- A TRA assessment of US$21.3
million in respect of Tusker Gold Limited. The tax
assessment is based on the sales price of the Nyanzaga property of
US$71 million multiplied by the tax
rate of 30%. Management is of the view that the assessment is
invalid due to the fact that the acquisition is for Tusker Gold
Limited, a company incorporated in Australia. The shareholding of the Tanzanian
related entities did not change and the Tusker Gold Limited group
structure remains the same as prior to the acquisition. The case
was decided in favour of Acacia however the TRA appealed that
decision. The tax tribunal upheld the decision in favour of Acacia
however the TRA has appealed to the Court of Appeal. We are
awaiting a hearing date to be set.
- 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 arguing that these were sourced from within
Tanzania. 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.
- Further TRA assessments issued to Acacia Mining plc in
January 2016 to the value of
US$500.7 million, based on an
allegation that Acacia is resident in Tanzania for corporate and dividend
withholding tax purposes. The corporate tax assessments have been
levied on certain Group net profits before tax. We are in the
process of appealing these assessments at the TRA Board level.
Acacia’s substantive grounds of appeal are, again, based on the
correct interpretation of Tanzanian permanent establishment
principles and law, relevant to a non-resident English incorporated
company.
- In addition, in Q1 2016 we received a judgement from the Court
of Appeal regarding a long standing dispute over tax calculations
at Bulyanhulu from 2000-2006. The Court of Appeal was reviewing
seven issues initially raised by the TRA in 2012 regarding certain
historic tax loss carry forwards and ruled in favour of Bulyanhulu
by the Tax Appeals Board in 2013. The TRA appealed against this
ruling and in 2014 the Tax Tribunal reversed the decision for all
seven issues. Acacia appealed against this judgement and in
March 2016 the Court of Appeal found
in favour of the TRA in five of the seven issues. The legal route
in Tanzania has now been
exhausted; however we are considering our options for the next
steps. The Court of Appeal ruling does not have a short term cash
flow impact but means that Bulyanhulu will be in a tax payable
situation approximately one year earlier than previously
expected. Acacia is yet to receive a revised tax assessment
following the judgement, but has raised further tax provisions of
US$69.9 million in order to address
the direct impact of the ruling on Bulyanhulu’s tax loss carry
forwards and the potential impact this may have on the
applicability of certain capital deductions for other years and our
other mines. The additional tax provisions raised are US$35.1 million relating to Bulyanhulu,
US$30.4 million relating to North
Mara and US$4.4 million relating to
Tulawaka and were all raised in H1 2016. Total provisions for
uncertain tax positions now amount to US$128
million.
19. 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 30 June 2017 the Group had no
loans of a funding nature due to or from related parties
(30 June 2016: zero; 31 December 2016: zero).