ACACIA MINING PLC
20 October 2017
Results for the 3 months ended 30 September 2017 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc ("Acacia'') reports third quarter results
"Our business has continued to be resilient in the face of the challenges in
Tanzania and delivered production of 191,203 ounces during the quarter at
all-in sustaining costs of US$939 per ounce sold", said Brad Gordon, Chief
Executive Officer of Acacia Mining. "Whilst production at Buzwagi was
especially pleasing, the continued restrictions on the export of gold/copper
concentrate, together with a lack of refunds of VAT have further impacted our
balance sheet, with our cash position falling to US$95 million at the end of
the quarter. In order to preserve our balance sheet and the long-term viability
of our business we took a range of actions including the transition of
Bulyanhulu to a reduced operational state, changing the processing flow sheet
at Buzwagi to enable the mine to sell all of the gold it produces, and securing
a US$1,300/oz floor price for the majority of our gold sales until February
2018. We note yesterday's announcement that a framework agreement has been
signed, which highlights the progress in the discussions between Barrick Gold
Corporation and the Government of Tanzania. We continue to seek further
clarification on the agreement and as yet no formal proposal has been put to
Acacia."
Operational Highlights
* Gold production of 191,203 ounces, 7% lower than Q3 2016, with gold sales
of 132,787 ounces
* AISC1 of US$939 per ounce sold, 6% below Q3 2016 and cash costs1 of US$616
per ounce sold, 3% higher than Q3 2016
+ Q3 AISC, assuming sales ounces equalled Q3 production, would have been
approximately US$820 per ounce
* Bulyanhulu commenced the transition to Reduced Operations ("ROP"),
announced in September, and process is ahead of schedule
* Buzwagi completed a processing trial in September and will only produce
saleable gold doré for the rest of the mine's life
Financial Highlights
* Q3 revenue of US$171 million, 40% lower than Q3 2016, impacted by the ban
on concentrate exports, resulting in the loss of gross revenue during the
quarter of approximately US$90 million
* Q3 EBITDA1 of US$50 million, 60% lower than Q3 2016, mainly due to the
lower sales, with adjusted EBITDA of US$77 million
* Net earnings1 of US$16 million (US3.9 cents per share), down from US$53
million in Q3 2016, with adjusted net earnings of US$35 million, down 32%
from Q3 2016
* Paid corporate tax relating to North Mara of US$9 million in Q3, bringing
year-to-date provisional corporate tax paid to US$26 million
* Cash on hand of US$95 million as of 30 September with net cash of US$24
million
* US$23 million of Bulyanhulu ROP costs, primarily related to contract exits
and retrenchments, were accrued in Q3 2017 and treated as other charges,
with majority of cash flow impact together with expected working capital
outflows due in Q4 2017
Three months ended 30 Nine months ended
September 30 September
(Unaudited) 2017 2016 2017 2016
Gold production (ounces) 191,203 204,726 619,406 616,751
Gold sold (ounces) 132,787 206,488 445,225 607,451
Cash cost (US$/ounce)1 616 598 588 626
AISC (US$/ounce)1 939 998 907 961
Net average realised gold price (US$/ 1,279 1,330 1,248 1,250
ounce)1
(in US$'000)
Revenue 170,602 284,695 562,266 789,642
EBITDA 1 50,302 124,825 211,717 309,707
Adjusted EBITDA1 76,695 122,125 242,914 302,624
Net earnings 16,038 52,787 78,581 46,659
Basic earnings per share (EPS) (cents) 3.9 12.9 19.2 11.4
Adjusted net earnings1 34,513 50,898 100,419 109,665
Adjusted net earnings per share (AEPS) 8.4 12.4 24.5 26.8
(cents)1
Cash (used in)/generated from operating (22,784) 99,947 (21,469) 257,043
activities
Capital expenditure2 35,619 52,900 128,075 138,072
Cash balance 95,321 302,061 95,321 302,061
Total borrowings 71,000 99,400 71,000 99,400
1 These are non-IFRS measures. Refer to page 15 for definitions 2 Excludes
non-cash capital adjustments (reclamation asset adjustments) and include land
purchases recognised as long term prepayments
Other Developments
Update on Discussions between Barrick Gold Corporation and the Government of
Tanzania
In late July, the Government of Tanzania ("GoT") and Barrick Gold Corporation
("Barrick"), Acacia's majority shareholder, commenced discussions with the aim
of resolving the current situation. As previously announced, the GoT and
Barrick, hosted a press conference in Tanzania yesterday to provide an update
on the ongoing discussions. Acacia has received a copy of the framework
agreement referred to in Barrick's two releases on 19 October and is seeking
further clarification. No formal proposal has been put to Acacia for
consideration at this point in time. As stated at the press conference, any
proposal agreed in principle between Barrick and the GoT will require Acacia's
approval. Acacia will consider any proposal once it receives the full details
and a further update will be provided when appropriate.
Bulyanhulu Reduced Operations
In September 2017, Acacia decided to transition Bulyanhulu to Reduced
Operations in order to preserve the viability of our business over the longer
term. This decision was a direct result of the concentrate export ban and the
deterioration of the operating environment in Tanzania as discussed below which
together led to negative cash flow of approximately US$15 million per month at
the mine, making normal operations at Bulyanhulu unsustainable. The ROP
programme includes the preservation of all assets and equipment to enable the
mine to resume underground operations in a timely manner should the export ban
be lifted and the operating environment in Tanzania stabilise. The transition
to ROP is expected to be complete in December and is tracking ahead of
schedule, with all underground mining and the processing of underground ore
having ceased.
The process is expected to include total one-off costs of around US$25 million,
with US$23 million of the costs accrued during Q3 2017. These primarily
comprise US$16 million of employment severance costs and US$5 million of
contract exit costs. Approximately US$2 million has been paid in Q3 2017, with
the balance due in Q4 2017. In addition there will be a natural cash outflow of
US$35 - US$40 million due to working capital outflows which will be incurred in
Q4 2017. The mine will also incur an average of US$5 million of operational
cash outflows per month during the transition period before reaching a steady
state of approximately US$3 million a month in December.
These costs are expected to be partly offset by the revenue from the
retreatment of tailings, which is expected to re-commence during Q4 2017 once
sufficient rainfall has been received in the region. Once operational, we
expect this to deliver production of approximately 30,000 to 35,000 ounces of
saleable doré per annum.
Bulyanhulu Carrying Value Review
The decision taken to transition Bulyanhulu to ROP during the quarter has
driven the need to undertake a carrying value review to determine whether the
recoverable amount of Bulyanhulu exceeds its carrying value. In the absence of
clarity at this stage over the future operating conditions in Tanzania, for the
purpose of the review we have assumed that the underground mine restarts in
early 2019 and is able to export gold/copper concentrate and the only change to
the fiscal regime is the increased royalty and clearing fee (movement from 4%
to 7%) that was legislated earlier this year and which Acacia agreed to pay
under protest. Our other key assumptions around gold price and discount rate
remains unchanged from those used in the carrying value review performed in
June 2017.
Based on these assumptions it was determined that sufficient headroom exists,
and as a result, no impairment losses have been recognised at this stage. Our
assumptions do not take into account any impact of a negotiated settlement
reached as a result of the negotiations underway between the Government of
Tanzania and Barrick relating to the current in-country matters, as the terms
of any possible settlement are currently not known. We are in the process of
updating our life-of-mine plans and will run a further review of Bulyanhulu in
light of these as well as any other potential changes to the operating and
financial parameters, and will provide an update in due course.
As was the case with the carrying value review performed in June 2017, we have
assessed reasonably possible sensitivities and they likewise do not result in
any impairment of carrying value.
Buzwagi Processing Changes
As previously announced, following a processing trial, Buzwagi made a change to
its processing flow sheet in September so that going forward, all of the
recovered gold at the mine will be saleable doré. Previously, Buzwagi produced
both doré and gold/copper concentrate and during 2017, gold/copper concentrate
has accounted for approximately 65% of Buzwagi's gold production. Since 3 March
2017, however, the mine has been unable to export and sell its concentrate, and
as such has only been selling approximately 35% of its gold production, whilst
incurring 100% of the cost of production. With the processing change which
requires the additional use of reagents in the leaching circuit at limited
additional operating costs, the mine should be able to achieve gold recoveries
of around 85% in Q4 2017, and sell an additional 8,000 - 10,000 ounces per
month for the remainder of the year. Buzwagi previously planned to end
concentrate production in Q2 2018, though as a result of the trial, the mine
will only produce doré from now until the end of its life in 2020.
Update on Tanzanian Operating Environment
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. Since the export ban was imposed, impacting approximately
35% of year to date group production, Acacia has seen a build-up of
approximately US$270 million of concentrate inventory in Tanzania, based on
current prices, with approximately 186,000 ounces of gold, 12.1 million pounds
of copper and 159,000 ounces of silver contained in the unsold concentrate. As
a result of the transition to ROP at Bulyanhulu, and the changes to the process
flow sheet at Buzwagi, all of Acacia's mines are now solely producing doré, and
as such we will not see further build-up in concentrate, although as previously
disclosed this will result in less gold production than previously expected for
2017. Acacia therefore expects to be able to sell all of the gold that it
produces going forward even if there is no change to the status of the export
ban on concentrate.
In early July, new legislation came into force which made significant changes
to the legal and regulatory framework governing the natural resources sector as
a whole in Tanzania. 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 are, in the interim, satisfying 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.
International Arbitration Process
As previously reported Bulyanhulu Gold Mine Limited ("BGML"), the owner and
operator of the Bulyanhulu mine, and Pangea Minerals Limited ("PML"), the owner
and operator of the Buzwagi mine have each referred their current disputes with
the Government of Tanzania to arbitration in accordance with the dispute
resolution processes agreed by the Government in its MDAs with BGML and PML.
The commencement of arbitration was necessary to protect the rights of BGML and
PML, although 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.
Receipt of corporate tax assessments
As previously announced, BGML and PML have received a series of Notices of
Adjusted and Jeopardy Assessments (the "Assessments") from the Tanzania Revenue
Authority ("TRA") for corporate income tax, covering the periods 2000 to 2017
for BGML and 2007 to 2017 for PML. The Assessments were issued in respect of
alleged under-declared export revenues, and appear to follow on from the
findings of the First Presidential Committee announced on 24 May 2017, and the
Second Presidential Committee announced on 12 June 2017. As we have stated
previously, Acacia refutes each set of findings and re-iterates that it has
fully declared all revenues. We have yet to receive copies of the reports
issued by the First and Second Presidential Committees. The allegations made by
the First and Second Committees are included in the matters that both BGML and
PML have already referred to international arbitration.
The Assessments assert that BGML owes the Government a total of approximately
US$154 billion, and PML approximately US$36 billion. The Assessments claim a
total of approximately US$40 billion of alleged unpaid taxes and approximately
US$150 billion of penalties and interest owed. Acacia is in the process of
disputing these Assessments and has requested the TRA's supporting
calculations, which have not yet been received.
In addition, post period end, PML was served with notices of adjusted corporate
income tax and withholding tax assessments for tax years 2005 to 2011 with
respect to the Tulawaka JV which was previously owned by PML. In 2014, the mine
was transferred by PML to the Tanzanian state mining company (Stamico) in an
attempt to support the development of a domestic mining industry. The new
assessments appear to total approximately US$3 billion. Interest and penalties
represent the vast majority of the new assessments. The TRA has not provided
PML with any explanations or reasons for the adjusted assessments, or with the
TRA's position on how the assessments have been calculated or why they have
been issued. Acacia is in the process of disputing these assessments.
Indirect Taxation
During the third quarter, Acacia incurred a further US$23 million of VAT
outflows and received no VAT refunds, which together with the outflow in H1
2017 has led to a total VAT outflow year to date of approximately US$74
million. As a result, our total indirect tax receivables have increased to
approximately US$175 million as at 30 September 2017. Approximately US$10
million is able to be offset against future North Mara corporate tax payments
under a historic memorandum of settlement.
As previously disclosed, 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. Bulyanhulu and Buzwagi have now
received notices from the TRA that they are not eligible for any VAT relief
from July 2017 on the basis that all production (both doré and concentrate) are
"raw minerals". At this stage there has been no equivalent notification at
North Mara. Acacia disputes this as a matter of law and as a matter that is in
contravention of the relevant terms of the MDAs.
Contribution to Tanzania
Tax Contribution
In the third quarter of 2017, Acacia paid a total of US$35 million of taxes and
royalties to the Tanzanian Revenue Authority. This is made up of provisional
corporate tax payments of US$9 million, final taxes due on North Mara's 2016
income tax assessment of US$3 million, royalties of US$12 million, payroll
taxes of US$7 million and other taxes of US$4 million. If the gold/copper
concentrate produced during the quarter was sold then approximately a further
US$6 million would have been paid in royalties. The provisional corporate tax
and final income tax payments have been offset against the indirect tax
receivable under the existing Memorandum of Settlement ("MOS") entered into
with the Tanzanian Government.
Sustainable Contribution
By the end of Q3, Acacia's Sustainable Communities team had either started or
completed 75% of the 24 infrastructure projects planned for 2017. Despite the
challenging operating environment, Acacia has remained committed to its 2017
sustainable initiatives in and around its operations. In Q3, the following were
the major projects implemented at each site:
* Bulyanhulu: The mine is continuing the construction of the Bugarama Health
Centre Phase 2. This project will cost US $532,000, with the mine
contributing US$500,000 and the Msalala District Council contributing
US$32,000. Phase 1 of the project was completed in 2016 at a cost of
US$470,000. Phase 2 will add a general ward and an operating theatre to the
clinic facilities. The health centre is a private-public partnership
between the mine and Msalala District Council, which is managing the
facility, and is responsible for staffing, furnishing, drugs supply and
maintenance. In addition, we continued our partnership under the Joint
Water Project Partnership with the Ministry of Water and Irrigation and the
Districts of Msalala, Nyang'hwale and Shinyanga.
* Buzwagi: At Buzwagi, we are close to completing the construction of the
first of two dormitories at Mwendakulima Secondary School at a cost of
almost US$100,000. The second wing will be started in Q4 at a similar cost.
In addition, the mine completed its tree planting campaign of 400,000 trees
at various areas within and outside the mining lease. A further 500,000
seedlings are now being raised at a nursery for a rehabilitation programme
to start during the coming wet season.
* North Mara: During the quarter, we constructed and renovated 2 schools -
Bwirege Secondary School and Genkuru Primary School at a total cost of over
US$400,000. This will benefit approximately 1,500 students.
Other development projects in the last quarter include continued support to
2,700 students with uniforms and books under the CanEducate program and
supporting sports through 3 coaching clinics in partnership with Sunderland
Football Club that reached over 65 male and female coaches. We also
strengthened our monitoring and evaluation of the development (livelihoods)
projects under implementation to ensure we achieve the intended objectives.
As part of improving the quality of education, we signed an MoU with Read
International Tanzania to refurbish 6 libraries (2 per mine site, with 1
belonging to a school and 1 within the community) as well as train teachers on
how to effectively use libraries in order to encourage a reading culture.
University students are selected and trained to be volunteers in managing these
facilities. The programme identifies existing infrastructure to use as
libraries thus creating ownership of the facility by the school or community.
All six libraries will be handed over at the end of November.
During the reporting period, Dalberg, a development consultant, conducted
scoping studies into Agriculture and SME development and the final report
preparation is underway. Some of the emerging findings suggest that whilst
agriculture is the key economic activity employing approximately 70% of the
population around our mine sites, access to water is the key challenge. In
order to catalyse economic growth in the agriculture sector, the greatest
potential for impact would be in addressing cross cutting challenges on water
access, good agricultural practice training, market linkages, and access to
inputs. In addition, investment in SME capacity building for product
differentiation and access to markets will enhance the performance of local
SMEs and diversify the local economy which will contribute to thriving local
economies. All the above activities are aligned to our Sustainable Communities
strategy and local development plans.
Entry into Gold Price Protection Measures
In September, as part of on-going measures to mitigate cash outflows, Acacia
bought put options covering 210,000 ounces of gold at a strike price of
US$1,300 per ounce. The total cost of the options was US$3.2 million and they
provide a minimum price for the majority of Acacia's planned doré production
until February 2018 above our budgeted gold price of US$1,200 per ounce, with
full upside exposure should the gold price trade above US$1,300 per ounce. The
options will expire in equal instalments of 35,000 ounces per month over the
period.
Management Changes
Post period end, Mark Morcombe, Chief Operating Officer, notified the Company
that he will resign from his position at the end of the year. Mark has made
significant contributions to the company's operating performance during his 18
months in the position and the company wishes him well in his future
endeavours. We will provide further information on plans for his replacement
when available.
Outlook
As previously announced, as a result of the reduction in operating activity at
Bulyanhulu, Acacia expects annual production to be in the order of 750,000
ounces, 100,000 ounces lower than the bottom of the previous guidance range of
850,000-900,000 ounces. This revised guidance is based on limited production
occurring beyond August at Bulyanhulu and marginally lower production at North
Mara than previously planned due to underground development delays as a result
of work permit issues for key contractors. The transition to production of gold
doré only at Buzwagi is not expected to impact guidance.
Previous AISC guidance of between US$880-920 per ounce sold remains unchanged
(with cash costs per ounce sold of US$580-620 also unchanged) due to the impact
of on-going cost-saving initiatives and a further reduction in capital
expenditure guidance to approximately US$160 million. The one-off and on-going
costs of the reduced operational state at Bulyanhulu are not included in our
AISC calculation, though the ongoing tailings retreatment costs are included.
Acacia is committed to strong cost discipline and is continuing to take steps
to ensure the long-term viability of our business whilst we await an outcome of
the discussions between Barrick and Government of Tanzania. During the third
quarter Acacia made significant changes to both the Bulyanhulu and Buzwagi
operations in order to preserve our balance sheet and ensure that we are able
to sell all of the gold we produce going forward. These changes, together with
the purchase of put options to achieve a floor price of US$1,300 per ounce for
the majority of our production are expected to enable the Group to return to
positive cash generation in early 2018. We continue to evaluate further steps
to protect our balance sheet including a reduction in corporate overheads,
expansionary drilling at North Mara and greenfield exploration activity.
Key Statistics Three months ended Nine months ended 30
30 September September
(Unaudited) 2017 2016 2017 2016
Tonnes mined Kt 8,608 9,501 26,647 28,847
Ore tonnes mined Kt 4,221 2,146 11,433 6,835
Ore tonnes processed Kt 2,004 2,351 6,864 7,251
Process recovery rate exc. % 91.7% 91.8% 92.7% 92.2%
tailings reclaim
Head grade exc. tailings reclaim g/t 3.3 3.4 3.4 3.3
Process recovery rate inc. % 90.9% 87.5% 90.0% 88.4%
tailings reclaim
Head grade inc. tailings reclaim g/t 3.3 3.1 3.1 3.0
Gold production oz 191,203 204,726 619,406 616,751
Gold sold oz 132,787 206,488 445,225 607,451
Copper production Klbs 3,832 3,557 12,897 11,984
Copper sold3 Klbs 37 3,277 1,341 11,361
Cash cost per tonne milled exc. US$/t 41 61 42 60
tailings reclaim1
Cash cost per tonne milled inc. US$/t 41 53 38 52
tailings reclaim1
Per ounce data
Average spot gold price2 US$/oz 1,278 1,335 1,251 1,260
Net average realised gold US$/oz 1,279 1,330 1,248 1,250
price1
Total cash cost1 US$/oz 616 598 588 626
All-in sustaining cost1 US$/oz 939 998 907 961
Average realised copper price US$/ 2.68 2.17 2.98 2.14
lbs
Financial results
Three months ended 30 Nine months ended
September 30 September
(Unaudited, in US$'000 unless otherwise 2017 2016 2017 2016
stated)
Revenue 170,602 284,695 562,266 789,642
Cost of sales (105,538) (175,327) (349,505) (530,766)
Gross profit 65,064 109,368 212,761 258,876
Corporate administration (6,780) (5,906) (19,300) (15,677)
Share based payments 637 (20,089) 8,422 (39,724)
Exploration and evaluation costs (5,295) (5,540) (21,445) (16,690)
Corporate social responsibility expenses (2,120) (2,983) (5,859) (7,597)
Other (charges)/income (24,186) 8,273 (43,803) 10,441
Profit before net finance expense and 27,320 83,123 130,776 189,629
taxation
Finance income 261 657 1,804 1,147
Finance expense (2,982) (3,023) (8,436) (8,403)
Profit before taxation 24,599 80,757 124,144 182,373
Tax expense (8,561) (27,970) (45,563) (135,714)
Net profit for the period 16,038 52,787 78,581 46,659
1 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures" on page 15 for definitions.
2 Reflect the London PM fix price.
3 Q3 2017 sales quantities relate to final sales adjustments of copper 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
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 mines, all located in
north-west Tanzania: Bulyanhulu, Buzwagi, and North Mara and a portfolio of
exploration projects in Kenya, Burkina Faso and Mali.
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 conference call will be held for analysts and investors on 20 October 2017 at
09:00 AM London time.
The access details for the conference call are as follows:
Participant dial in: +44 20 3059 8125
Password: Acacia Mining
A recording of the conference call will be made available on the Company's
website, www.acaciamining.com, after the call.
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.
Operating Review
Acacia delivered production of 191,203 in Q3 2017, a decrease of 7% compared to
the prior year quarter, whilst AISC of US$939 per ounce sold was 6% lower
compared to Q3 2016 despite a lower production base. Cash costs of US$616 per
ounce sold were 3% higher than the prior year period. For reference purposes,
if Q3 sales ounces equalled Q3 production, AISC would have been approximately
US$820 per ounce and cash costs would have been approximately US$600 per ounce.
North Mara achieved gold production of 72,011 ounces for the quarter, 36% lower
than in Q3 2016, which was a record quarter. Whilst the Gokona underground mine
contributed more ore tonnes than in Q3 2016, they were at lower grades as a
result of delays in receiving work permits for our international development
contractors which impacted on underground development and delayed the
development of higher grade stopes, together with a focus on the lower grade
West Zone. Gold ounces sold for the quarter of 74,585 ounces were 34% lower
than the prior year quarter and broadly in line with the corresponding decrease
in production. AISC increased by 32% to US$864 per ounce sold predominantly due
to the lower production base.
Buzwagi produced 69,097 ounces, which was 74% higher than Q3 2016 due to an 83%
increase in head grade as a result of higher grade ore mined from the main ore
zone at the bottom of the pit in Q3 2017. AISC per ounce sold of US$695 was 35%
lower than Q3 2016 (US$1,076/oz), mainly driven by the higher production base.
At Bulyanhulu, gold production of 50,094 ounces was 5% lower than Q3 2016,
despite a 12% increase in production from underground mining. As expected,
there was limited production during September 2017 after the decision to
transition Bulyanhulu into reduced operations. Production for the quarter was
also negatively impacted by continued drought in the Kahama district which
resulted in a temporary halt in production from reprocessed tailings. AISC per
ounce sold for the quarter of US$1,365 was 5% higher than Q3 2016 (US$1,300)
mainly driven by the impact of lower sales ounces due to the inability to
export metallic mineral concentrates, partly offset by lower overall direct
mining costs due to the reduced operations programme.
Total tonnes mined during the quarter amounted to 8.6 million tonnes, 9% lower
than Q3 2016, mainly as a result of a 16% decrease in total tonnes mined at
Buzwagi driven by lower waste movement as we getting closer to bottom of the
pit. Ore tonnes mined of 4.2 million tonnes were 97% higher than Q3 2016 mainly
due to higher ore tonnes from Buzwagi and North Mara (from both the Nyabirama
open pit and the Gokona Underground).
Ore tonnes processed amounted to 2.0 million tonnes, a decrease of 15% on Q3
2016, resulting mainly from the temporary halt of the tailings retreatment at
Bulyanhulu. The lower ore tonnes processed, combined with a 3% decrease in head
grade, drove production 7% lower compared to Q3 2016 as set out above.
Cash costs of US$616 per ounce sold for the quarter were 3% higher than in Q3
2016, primarily due to:
* Lower capitalisation of development costs mainly at Bulyanhulu due to
delays in underground waste development activity and at North Mara due to
lower waste stripping at Nyabirama (US$107/oz);
* Lower co-product revenue as a result of the gold/copper concentrate export
ban (US$60/oz); and
* Lower production base (US$123/oz); offset by
* Increased build-up of ore stockpiles at Buzwagi, as a result of the
increased ore tonnes mined (US$111/oz);
* Lower overall direct mining cost mainly at Bulyanhulu driven by lower
underground activities (US$113/oz); and
* Lower sales related cost driven by lower sales volumes, despite increased
royalty rates and additional clearance fees charged (US$36/oz).
Included in cash cost for the quarter, and ultimately cost of sales, is a
credit of approximately US$32.1 million (US$209/oz) relating to the build-up of
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$939 per ounce sold for the quarter was 6% lower
than Q3 2016, despite the lag in sales against production. This was driven by
the impact of a much lower revaluation charge relating to future share-based
payments compared to Q3 2016 (US$156/oz) and lower capitalised development
costs at both Bulyanhulu and North Mara (US$141/oz), partly offset by the
impact of lower sales ounces on individual cost items (US$222/oz) and the
higher cash costs as discussed above (US$18/oz).
If our sales ounces equalled production, AISC for the quarter would have been
approximately US$820 per ounce sold, compared to US$1,028 per ounce sold on the
same basis in Q3 2016, a decrease of 20%.
Capital expenditure amounted to US$35.6 million compared to US$52.9 million in
Q3 2016, the decrease mainly driven by lower capitalised development costs.
Capital expenditure primarily comprised of capitalised development and
stripping (US$22.6 million), expansion of the tailings storage facility and ore
dumps at Buzwagi and North Mara (US$3.6 million), investment in mobile
equipment and component change-outs at North Mara and Bulyanhulu (US$2.5
million) and capitalised drilling mainly for resource and reserve development
at North Mara's Gokona underground (US$2.4 million).
Mine Site Review
Bulyanhulu
Key statistics
Three months ended 30 Nine months ended
September 30 September
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced oz 50,094 52,504 172,636 209,573
Ounces sold oz 26,265 53,764 107,479 204,483
Cash cost per ounce sold1 US$/oz 863 808 812 700
AISC per ounce sold1 US$/oz 1,365 1,300 1,346 1,057
Copper production Klbs 1,095 1,157 3,906 4,684
Copper sold2 Klbs (11) 1,107 588 4,261
Run-of-mine:
Underground ore tonnes hoisted Kt 187 186 596 665
Ore milled Kt 189 168 612 670
Head grade g/t 9.0 9.4 8.6 9.3
Mill recovery % 88.9% 85.9% 90.1% 91.3%
Ounces produced oz 48,683 43,661 153,279 183,744
Cash cost per tonne milled1 US$/t 104 228 124 192
Reprocessed tailings:
Ore milled Kt 82 419 905 1,199
Head grade g/t 1.3 1.5 1.4 1.5
Mill recovery % 42.0% 44.3% 46.8% 45.3%
Ounces produced oz 1,411 8,843 19,356 25,829
Capital Expenditure
- Sustaining capital US$ 2,881 4,892 11,480 16,398
('000)
- Capitalised development US$ 8,152 18,648 39,206 47,086
('000)
- Expansionary capital US$ 57 321 1,039 1,074
('000)
11,090 23,861 51,725 64,558
- Non-cash reclamation asset US$ 386 (3,062) 577 6,875
adjustments ('000)
Total capital expenditure US$ 11,476 20,799 52,302 71,433
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 17 for definitions.
2Q3 2017 sales quantities relate to final sales adjustments of copper sales
recorded during Q1 2017.
Operating performance
Gold production amounted to 50,094 ounces, which was 5% lower than Q3 2016,
despite a 12% increase in production from underground mining. As expected,
limited production occurred during September following the decision to
transition Bulyanhulu into reduced operations. Production for the quarter was
also negatively impacted by continued drought in the Kahama district which
resulted in a temporary halt in production from reprocessed tailings, which
meant we lost about 6,000 ounces of production from reprocessing of tailings.
The reprocessing of tailings is expected to re-start in Q4 2017, assuming
adequate rainfall is received. Production during the quarter comprised 24,677
ounces of gold in concentrate and 25,417 ounces of gold in doré.
Gold sold for the quarter of 26,265 ounces, was 48% lower than production and
51% lower than Q3 2016 mainly as a result of the inability to export
concentrate, combined with the lower production base.
Copper production of 1.1 million pounds for the quarter was 5% lower than Q3
2016 mainly driven by lower copper grades. There were no copper sales recorded
during the quarter due to the lack of exports of concentrate. Negative sales
quantities for the quarter relate to final sales adjustments of copper sales
recorded during Q1 2017.
Underground ore tonnes hoisted were in line with the comparative quarter
despite ceasing underground activities in the middle of September, given that
Q3 2016 included a two week shutdown of the vertical shaft.
Cash costs of US$863 per ounce sold were 7% higher than Q3 2016 (US$808/oz),
mainly due to the lower production base (US$356/oz), lower capitalised
development costs (US$290/oz) and lower co-product revenue (US$115/oz), partly
offset by lower overall direct mining cost driven by lower underground
activities (US$523/oz), as well as lower sales related costs due to lower sales
volumes (US$93/oz). Included in cash costs is a credit of approximately US$18.1
million (US$594/oz) relating to the build-up of finished gold inventory as a
result of concentrate sales delays.
AISC per ounce sold for the quarter of US$1,365 was 5% higher than Q3 2016
(US$1,300/oz) driven by the impact of lower sales ounces on individual cost
items (US$515/oz) and higher cash costs as discussed above (US$55/oz), partly
offset by lower capitalised development costs (US$400/oz) and lower sustaining
capital expenditure (US$77/oz).
Capital expenditure for the quarter before reclamation adjustments amounted to
US$11.1 million, 54% lower than Q3 2016 (US$23.9 million), mainly driven by
lower capitalised development due to lower waste development during the current
quarter (US$10.5 million) as well as a decrease in sustaining capital
expenditure (US$2.0 million).
Capital expenditure mainly consisted of capitalised underground development
costs (US$8.2 million), investment in mobile equipment and component
change-outs (US$1.0 million) and investment in power infrastructure through
construction of a STATCOM centre for increased power stability (US$0.5
million).
Buzwagi
Key statistics
Three months ended 30 Nine months ended
September 30 September
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced oz 69,097 39,699 195,181 119,918
Ounces sold oz 31,938 39,284 85,032 119,688
Cash cost per ounce sold1 US$/oz 564 986 647 1,030
AISC per ounce sold1 US$/oz 695 1,076 742 1,108
Copper production Klbs 2,738 2,400 8,991 7,300
Copper sold2 Klbs 47 2,171 752 7,100
Mining information:
Tonnes mined Kt 4,259 5,072 13,823 16,495
Ore tonnes mined Kt 3,037 1,203 7,988 3,808
Processing information:
Ore milled Kt 1,020 1,063 3,215 3,245
Head grade g/t 2.2 1.2 2.0 1.2
Mill recovery % 94.0% 94.4% 95.7% 94.5%
Cash cost per tonne milled1 US$/t 18 36 17 38
Capital Expenditure
- Sustaining capital US$ 2,238 1,087 3,103 3,318
('000)
- Capitalised development US$ - - - -
('000)
2,238 1,087 3,103 3,318
- Non-cash reclamation asset US$ 215 (1,795) 214 1,212
adjustments ('000)
Total capital expenditure US$ 2,453 (708) 3,317 4,530
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non-IFRS measures" on page 17 for definitions.
2 Q3 2017 sales quantities relate to final sales adjustments of copper sales
recorded during Q1 2017.
Operating performance
Gold production for the quarter of 69,097 ounces was 74% higher than in Q3 2016
due to an 83% increase in head grade as a result of higher grade ore mined from
the main ore zone at the bottom of the pit in Q3 2017. Production during the
quarter was comprised of 32,833 ounces of gold in concentrate and 36,264 ounces
of gold in doré.
Gold sold for the quarter of 31,938 ounces, was 54% lower than production and
19% behind Q3 2016, primarily due to the inability to export concentrate,
slightly offset by a higher production base. Sales are expected to normalise
and align with production in Q4 2017 due to the changes to the process flow
sheet in September meaning that Buzwagi will solely produce doré until the end
of its life in 2020, although recoveries are expected to fall to around 85% in
Q4.
Buzwagi is also experiencing similar water shortages to Bulyanhulu. To date,
the mine has been able to largely mitigate the lack of rainfall through use of
its large water storage facilities and purchase of water from the local
authority. However if the onset of the rainy season is significantly delayed
there may be an impact to processing operations during the quarter.
Copper production of 2.7 million pounds for the quarter was 14% higher than the
prior quarter period, mainly due to increased copper grades. There were no
copper sales recorded during the quarter due to the lack of exports of
concentrate. Sales quantities for the quarter relate to final sales adjustments
of copper sales recorded during Q1 2017.
Total tonnes mined of 4.3 million tonnes were 16% lower than Q3 2016, primarily
due to the reduced need for waste movement as the pit nears the end of its
life. Ore tonnes mined were 153% higher than 2016 as a result of the same
effect.
Cash costs for the quarter of US$564 per ounce sold were significantly lower
than Q3 2016 (US$986/oz), a decrease of 43%, primarily driven by the higher
production base (US$181/oz), increased investment in ore stockpiles as a result
of increased focus on ore mining (US$267/oz), lower direct mining cost (US$66/
oz), partly offset by lower co-product revenue in the form of copper
concentrates (US$157/oz). Included in cash costs is a credit of approximately
US$15.7 million (US$408/oz) relating to the build-up of finished gold inventory
as a result of concentrate sales delays.
AISC per ounce sold of US$695 was 35% lower than the Q3 2016 (US$1,076/oz).
This was mainly driven by the lower cash costs as discussed above (US$422/oz).
Capital expenditure before reclamation adjustments amounted to US$2.2 million,
more than double that spent in Q3 2016 (US$1.1 million), mainly consisting of
the expansion of the tailings storage facility which started during Q3 2017
(US$1.9 million).
North Mara
Key statistics
Three months ended 30 Nine months ended
September 30 September
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced oz 72,011 112,523 251,589 287,260
Ounces sold oz 74,585 113,440 252,715 283,280
Cash cost per ounce sold1 US$/oz 550 364 473 402
AISC per ounce sold1 US$/oz 864 655 774 694
Open pit:
Tonnes mined Kt 3,977 4,140 11,727 11,374
Ore tonnes mined Kt 813 655 2,349 2,050
Mine grade g/t 1.6 2.0 1.8 1.9
Underground:
Ore tonnes trammed Kt 185 103 501 313
Mine grade g/t 7.9 23.1 8.6 15.6
Processing information:
Ore milled Kt 714 701 2,133 2,137
Head grade g/t 3.4 5.4 4.0 4.5
Mill recovery % 91.5% 92.8% 92.2% 91.9%
Cash cost per tonne milled1 US$/t 57 59 56 53
Capital Expenditure
- Sustaining capital2 US$ 5,016 4,497 17,193 14,578
('000)
- Capitalised development US$ 14,456 22,629 47,738 53,680
('000)
- Expansionary capital US$ 2,442 466 6,931 924
('000)
21,914 27,592 71,862 69,182
- Non-cash reclamation asset US$ 430 (2,868) 374 3,384
adjustments ('000)
Total capital expenditure US$ 22,344 24,724 72,236 72,566
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 17 for definitions.
2 Includes land purchases recognised as long term prepayments.
Operating performance
North Mara achieved gold production of 72,011 ounces for the quarter, 36% lower
than in Q3 2016. Whilst the Gokona underground mine contributed more ore tonnes
than in Q3 2016, they were at lower grades as a result of delays in receiving
work permits for our international development contractors which impacted on
underground development and delayed the development of higher grade stopes,
together with a focus on the lower grade West Zone. In addition, we have also
seen lower grade ore mined from the Nyabirama pit as we worked through the
Stage 4 cutback of the pit and we saw increased ore tonnes at lower grades
following grade control drilling. Gold ounces sold for the quarter of 74,585
ounces were 34% lower than the prior year quarter and broadly in line with the
corresponding decrease in production.
Cash costs of US$550 per ounce sold were 51% higher than Q3 2016 (US$364),
mainly driven by the lower production base (US$190/oz) and lower capitalisation
of development costs mainly due to lower waste stripping at Nyabirama open pit
(US$88/oz), partly offset by an increased investment in ore stockpiles in Q3
2017 (US$120/oz).
AISC of US$864 per ounce sold was 32% higher than Q3 2016 (US$655/oz) as a
result of higher cash costs discussed above (US$186/oz) and the impact of lower
sales volumes (US$152/oz), partly offset by lower capitalised development costs
(US$110/oz).
Capital expenditure for the quarter, before reclamation adjustments, of US$21.9
million was 21% lower than in Q3 2016 (US$27.6 million). Key capital
expenditure include capitalised stripping costs (US$10.6 million), capitalised
underground development costs (US$3.8 million), capitalised drilling mainly for
resource and reserve development at Gokona underground (US$2.4 million),
investment in mobile equipment and component change-outs (US$1.5 million) and
expenditure relating to TSF and lower grade ore dumps (US$1.7 million).
Exploration Review
Brownfield Exploration
North Mara - Gokona Underground
A total of 55 holes for 11,503 metres of extension and infill drilling were
completed at Gokona underground during the third quarter (18,766 metres year to
date), with a further 76 holes for 6,238m of grade control drilling undertaken
(22,319 metres year to date). Extensive drilling was undertaken during the
quarter to further delineate the western extension of the "Golden Banana" (East
Zone) lode mineralisation between the Gokona Fault and the completed Gokona
open pit. This zone is now known as "GB2" zone, and further wide and high grade
intercepts continued to be returned from drilling, including but not limited
to:
* UGKD00341 35m @ 6.6 g/t Au from 35m
* UGKD00349 10m @ 75.7 g/t Au from 64m
* UGKD00326 22m @ 13.0 g/t Au from 49m
* UGKD00328 52m @ 11.4g/t Au from 35m
* UGKD00329 34m @ 8.4 g/t Au from 40m
* UGKD00331 57m @ 31.8 g/t Au from 54m
* UGKD_00306 32m @ 8.4g/t Au from 120m
* UKGC_00334 12m @ 10.6g/t Au from 23m
* UKGC_00353 23m @ 21.8 g/t Au from 53m
* UKGC_00357 10m @ 17.2 g/t Au from 58m
* UKGC_00386 11m @ 11.2 g/t Au from 75m
Additionally, a programme of drilling was conducted to test for continuation of
the eastern extremity of the main "Golden Banana" mineralisation, with several
significant intersections returned showing that the zone may be extended to the
east outside delineated resources. Better results included:
* UKGC_00361 11m @ 5.0 g/t Au from 18m
* UKGC_00362 6m @ 6.7 g/t Au from 20m
* UKGC_00364 11m @ 6.7 g/t Au from 23m
* UKGC_00365 9m @ 7.4 g/t Au from 26m
* UKGC_00366 8m @ 7.2 g/t Au from 30m
A programme of drilling was also conducted to test for offset continuation, at
depth, below the interpreted low-angle fault that locally terminates the
"Golden Banana" mineralisation. Drilling in the quarter was successful at
confirming the continuation of high grade gold mineralisation, with two holes
retuning significant intersections from an area cross-cut by a series of later
dykes, including:
* UGKD339 9m @ 35.1 g/t Au from 162m
* UGKD340 16m @ 19.7 g/t Au from 177m
* UGKD340 1m @ 107.0 g/t Au from 207m
Three underground diamond drill rigs were moved to the newly completed drill
drive at the 1030mRL elevation, and will commence drilling of the Gokona
Central area in the fourth quarter; with initial drilling testing
mineralisation beneath the existing Gokona open pit. The latest planned
programme will be comprised of approximately 50,000 metres of extensional and
infill drilling per year for the next two years, with approximately 10,000
metres to be drilled in the fourth quarter. This drilling is aimed at unlocking
the potential of the full strike extent of the deposit to optimise mining
efficiency.
Note: all intersections are downhole widths with varying true thickness due to
the holes being part of underground fan drilling
North Mara - Nyabirama
The programme of infill drilling to approximately 50 metre drill spacing was
completed during the quarter with 7 holes for 4,160 metres drilled (17,145
metres year to date). This drilling will be incorporated into technical work
underway by our mine planning team as we investigate the potential for an
underground mine at Nyabirama. Better results received during the quarter
included:
* NBD0165 7.7m @ 3.5 g/t Au from 218m, and
1.8m @ 7.5 g/t Au from 315.2m
* NBD0166 2.0m @ 87.9 g/t Au from 236m incl. 1m @ 161g/t Au from 237m, and
* NBD0167 5.0m @ 8.5 g/t Au from 464m incl. 1m @ 36g/t Au from 467m, and
7.0m @ 12.8 g/t Au from 473m incl. 1m @ 81g/t Au from 475m
* NBD0168 2.0m @ 8.4 g/t Au from 378m,
5.0m @ 4.5 g/t Au from 419m
* NBD0170 2.4m @ 7.6 g/t Au from 324m, and
5.2m @ 5.9 g/t Au from 366.8m, and
13.5m @ 20.1 g/t Au from 377.5m
Greenfield Exploration
Kenya
Four (4) to Seven (7) diamond core rigs drilled targets along the Liranda
Corridor area on the Isulu (formerly Acacia), Bushiangala, Shigokho and
Shibuname Prospects during Q3 2017. Additionally, one reverse circulation (RC)
rig completed reconnaissance drilling across gold-in-soil anomalies on the
Barkalare and Kitson-Kerebe target areas in the Lake Zone gold camp of the West
Kenya Project.
West Kenya Project
Drilling during Q3 within the Liranda Corridor was focused on better defining
and constraining the resource model on the Isulu Prospect (formerly Acacia), as
well as completing step-out drilling down plunge of the existing resource. At
Bushiangala drilling was aimed at improving the confidence and understanding
the geometries of the mineralised lodes. At the Shigokho and Shibuname
Prospects drilling was designed to test the extension of mineralised intercepts
from previous drilling and targeting additional resources close to Isulu. The
Q3 programme consisted of 20 diamond core holes (including six core wedge
holes) for 6,225 metres at the Isulu and Bushiangala Prospects and five diamond
core holes for 1,282 metres at the Shigokho and Shibuname Prospects. In 2017,
78 holes for 37,999m of diamond drilling have been completed on the Isulu -
Bushiangala prospects.
The drilling on the Isulu and Bushiangala Prospects has better defined the
mineralisation to support the initial inferred resource of 1.3Moz. It has
successfully bulked out some of the Isulu lodes through additional infill
drilling as well as increasing the confidence at Bushiangala but has
constrained the mineralisation in areas where we had expected some lateral
extensions. As a result we do not expect any material increase in the resource
by the end of 2017. We continue to believe 2Moz is a realistic target for the
project based on our current understanding of the deposit and the recent
drilling has helped to define targets with scope for incremental
mineralisation, including along strike, which we plan to test in 2018. Better
results from Isulu and Bushiangala received during Q3 included:
Isulu Prospect (formerly Acacia)
* LCD0158W1 - 2.5m @ 114 g/t Au from 892m and 1.0m @ 11.0 g/t Au from 898m,
* LCD0158W3 - 3.7m @ 10.7 g/t Au from 925m and 0.6m @ 21.0 g/t Au from 931m,
* LCD0161W1 - 2.0m @ 37.0 g/t Au from 995m and 1m @ 21.5 g/t Au from 1,003m,
* LCD0161W3 - 2.0m @ 8.49 g/t Au from 958m and 4.0m @ 2.27g/t Au from 972m,
* LCD0162W1 - 2.0m @ 7.52 g/t Au from 846m and 2.0m @ 2.07 g/t Au from 852m,
* LCD0168 - 2.0m @ 7.06g/t Au from 698m, and 2.8m @ 3.81 g/t Au from 760m
* LCD0175 - 3.0m @ 55.2 g/t Au from 129m
Bushiangala Prospect
* LCD0173 - 3.1m @ 7.07 g/t Au from 187m,
* LCD0174 - 3.5m @ 6.70 g/t Au from 154m,
* LCD0176 - 1.5m @ 12.0 g/t Au from 134m and 3.1m @ 12.0 g/t Au from 175m,
* LCD0177 - 1.5m @ 10.5 g/t Au from 114m,
* LCD0182 - 0.6m @ 8.19 g/t Au from 116m,
* LCD0189 - 2.0m @ 12.7 g/t Au from 164m,
* LCD0192 - 2.0m @ 23.1 g/t Au form 166m
The current drill programme originally planned for approximately 48,000 metres
of diamond core drilling, is planned to be completed in October 2017 with two
rigs now operating and completing deep down-plunge extension holes targeting
mineralisation between 800m and 1,000 metres vertical depth with the objective
of increasing the Isulu Prospect Inferred resource. Planning for 2018 drilling
is currently underway to assess a series of evolving targets within 2km of the
Isulu resource area.
Burkina Faso
During Q3 2017 we continued to explore our properties in the highly prospective
Houndé Belt in southwest Burkina Faso. Acacia currently manages four joint
ventures and an interest in over ~2,700km2 of prospective greenstone belt. A
major component of Q3 and year-to-date work programmes in 2017, apart from
drilling, has been to review the structural architecture of the 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%
(end 2018)
During the quarter we continued to focus on both resource extensions to the
Tankoro Resource and regional exploration programmes searching for new
discoveries. During Q3 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 847 metres RC, 673 metres diamond core
(DD) and 4,122 metres of Aircore (AC) were completed, bringing the year to date
totals to 34,165 metres AC, 3,051 metres of RC and 6,664 metres of diamond core
drilling. In addition to this, rock chips were collected on regional targets.
Tankoro - MM and MC Zones1
During Q3 we completed planned 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 was
adopted "cycling" the rig between the Chewbacca, Yoda, Anakine and Jabba
targets within the MM and MC parallel mineralised structures. All holes
drilled to date continued to intersect the targeted porphyries and cross
structures, with the best potential at this stage interpreted to be depth
extensions on the MC (Jabba) Zone where drilling has identified multiple
mineralised porphyries and gold mineralisation in the surrounding intercalated
sediments. Better results from drilling included:
* FRC1082 - 2.2m @ 4.74g/t Au from 324.7m, 5m @ 2.18g/t Au from 370m and
6.15m @ 6.33g/t Au from 419m;
* FRC1083A - 3.5m @ 3.79g/t Au from 406.5m (including 1m @ 8.75g/t Au), 1.85m
@ 8.03g/t Au from 429.85m and 1.05m @ 5.19g/t Au from 504m;
* FRC1076 - 6m @ 11.9g/t Au from 231m, 6.7m @ 3.80g/t Au from 240.8m
(including 4m @ 6.12g/t Au)
The targeted higher grade lodes on the MM Zone were either lower grade that
expected or had a shorter strike extent than expected, and as a result the
future focus of deeper drilling will be on the MC (Jabba) Zone and areas
outside those tested on the MM Zone to date. A review of the entire Tankoro
mineralised trend is currently underway in order to better define potential
open-pit and underground resource expansion targets, and to scope out the
required drill programmes needed to fully test the core 9-10km strike extent of
the resource area.
Tankoro Corridor - Phantom, Phantom East & Phantom West1
The MM & MC Zones host the bulk of the Tankoro project's 2.1Moz mineral
resource and features several near-surface, higher-grade shoots which extend to
depth and have potential for exploitation by underground mining. The Phantom,
Phantom West and Phantom East Zones represent potential extensions that could
add shallow ounces to the global resource. Limited drilling was undertaken
during the quarter with a series of RC/DD holes drilled right before the end of
the dry season. Additional drilling is warranted in 2018 based on results of
these first few holes showing potential to add 2-6g/t resource ounces,
especially since Phantom, Phantom East, Phantom West (northeast resource
extensions) and Kenobi and Obi (southwest extensions) have been only sparsely
drilled relative to the rest of the system. The better results from RC/DD
received during the quarter include:
* Phantom East - FRC1081 - 1.85m @ 6.83g/t Au from 173.65m;
* Phantom East - FRC1053RE1 - 5.5m @ 4.88g/t Au from 120m and 9m @ 4.85g/t
Au from 129.5m,
* Phantom - FRC1088 - 2.45m @ 2.42g/t Au from 145.4m
* Phantom West - FRC1091 - 4.25m @ 2.12g/t Au from 248.45m.
One sample of primary mineralisation at Phantom has been submitted for
preliminary metallurgical test-work.
Tankoro Southwest Extension1
AC drilling was completed across multiple IP-geophysical and gold-soil
geochemical targets on the southwest extensions of the Tankoro resource trend,
known as the Djimbake area. A total of 33 holes for 1,992 metres were drilled
for the quarter across 12 individual target area, bringing the YTD totals to
114 holes for 6,948 metres. The AC drilling was following up previous anomalous
AC drill results from Q4 2016, testing the southern extension of the Kenobi
Trend, and testing for new mineralised zones. Assay results were only partially
received at quarter-end with better results including:
* 4m @ 1.46g/t Au 6m @ 1.11g/t Au 10m @ 1.73g/t Au
* 8m @ 1.19g/t Au 12m @ 0.66g/t Au 12m @ 0.51g/t Au
* 10m @ 0.96g/t Au 12m @ 0.63g/t Au 12m @ 0.55g/t Au
* 8m @ 2.57g/t Au 8m @ 4.25g/t Au 14m @ 0.87g/t Au
* 6m @ 1.33g/t Au 6m @ 1.99g/t Au 4m @ 1.17g/t Au
Gold anomalism in the AC drilling occurs in weathered and altered sediments and
porphyritic intrusive rocks with observed alteration being carbonate, sericite
and kaolinite; minor quartz veining was also observed co-incident with some
better zones of gold anomalism. Planned follow-up drilling includes infill and
step-out AC traverses as well as some RC and diamond core drilling to determine
the significance of the shallow oxide gold mineralisation and orientation/
controls in fresh rock.
Ouangoro Trend1
Aircore drilling commenced at the beginning of the quarter on the Ouangoro
Trend and has identified continuous gold anomalism along several interpreted
NNE-trending linear geophysical features. A total of 15 holes for 970 metres
were drilled for the quarter, bringing the YTD totals to 382 holes for 24,097
metres on predominantly 200m and 400m spaced drill fences. Positive results
have been returned from the majority of AC traverses including better results
of:
* 20m @ 0.67g/t Au from 28m (including 2m @ 12m @ 1.73g/t Au
3.09g/t Au)
* 8m @ 0.86g/t from surface (including 2m @ 10m @ 1.95 g/t Au
2.32g/t Au)
* 18m @ 0.61g/t Au from 6m (including 4m @ 8m @ 1.10 g/t Au
1.69g/t Au)
* 2m @ 1.80g/t Au 6m @ 1.40 g/t Au
* 6m @ 1.04g/t Au 4m @ 1.16 g/t Au
* 4m @ 1.34g/t Au 4m @ 1.58 g/t Au
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, often interpreted to be cross-cut by 070-trending
structures (a possible control to higher grade shoots).The next phase of work
being contemplated for the Ouangoro Trend is to complete trenching and
IP-geophysical surveys to help better define the target structures and to look
for local controls to higher grade mineralisation. Follow-up AC, RC and DD
drilling will also be part of a phased follow-up programme in 2018.
1 Drilling results are quoted as downhole intersections. True widths of
mineralisation intersected by RC and DDH drilling are estimated to be
approximately 70% to 80% of reported downhole intersection lengths, except as
otherwise noted. The orientation of some of the mineralised units by AC
drilling is not yet well understood.
Pinarello & Konkolikan Joint Venture (Canyon Resources Limited) - current
ownership 75%, potential to earn 100%
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%.
A total of 1,073 soil samples, 23,089 metres of Aircore drilling and 6,401
metres of RC drilling have been completed during 2017. Results from RC
drilling completed in Q2 and received in Q3 2017 were mixed with broad zones of
gold anomalism and narrow higher grade zones intersected at the Gaghny Prospect
whilst hole PIRC0039 on the northern Pinarello licence following up the
projected extension of the Tankoro Trend intersected 6m @ 11.1g/t Au from 28m,
including 2m @ 32.4g/t Au from 28m. A programme of RC and diamond core
drilling is being designed to follow-up this intersection during Q4 2017 and
into Q1 2018.
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 also been
completed. This work identified a number of significant large scale
gold-in-soil anomalies (soils up to 3g/t Au). A 200m x 200m infill programme of
soil sampling commenced in Q3 with a further 45 samples collected, bringing the
year to date total to 7,780 soil samples. The programme of soil sampling was
suspended in early July due to the commencement of the wet season.
Results from the soil sampling programmes received during the quarter continue
to be encouraging with gold assays up to 3,841ppb Au (8.84g/t Au) reported.
Portable XRF work on the soil samples shows anomalous pathfinder elements
including, Mo, W, As and K co-incident with several of the large-scale gold
anomalies identified to date. Work in Q4 2017 will involve continuing infill
soil sampling, mapping, and XRF multi-element analysis in preparation for
trenching and drilling in Q1 2018.
Mali
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 quarter, 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 year to date has returned positive results from 8 of 13 gold
anomalies tested including better results of; 4m @ 18.7g/t and 4m @ 5.62g/t,
13m @ 1.11g/t, 15m @ 0.50g/t, 13m @ 0.50g/t, 25m @ 0.50g/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. Work in Q4 2017
will involve trenching and follow-up reconnaissance drilling as required to
better define the highest priority targets for a more extensive campaign of
drilling.
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$000) Three months ended 30 Nine months ended 30
September September
(Unaudited) 2017 2016 2017 2016
Gold revenue 169,828 275,897 555,687 760,511
Less: Realised gold hedge - (1,331) - (1,331)
losses
Net gold revenue 169,828 274,566 555,687 759,180
Gold sold (ounces) 132,787 206,488 445,225 607,451
Net average realised gold price 1,279 1,330 1,248 1,250
(US$/ounce)
Cash cost per ounce sold is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, and production taxes,
and exclude capitalised production stripping costs, inventory purchase
accounting adjustments, unrealised gains/losses from non-hedge currency and
commodity contracts, depreciation and amortisation, reduced operation costs and
corporate social responsibility charges. Cash cost is calculated net of
co-product revenue. Cash cost per ounce sold is calculated by dividing the
aggregate of these costs by total ounces sold.
The presentation of these statistics in this manner allows Acacia to monitor
and manage those factors that impact production costs on a monthly basis. Cash
costs and cash cost per ounce sold are calculated on a consistent basis for the
periods presented.
The table below provides a reconciliation between cost of sales and total cash
cost to calculate the cash cost per ounce sold.
Three months ended 30 Nine months ended 30
(US$'000) September September
(Unaudited) 2017 2016 2017 2016
Cost of Sales
Direct mining costs 68,508 111,649 228,818 346,085
Third party smelting and 1,498 5,589 8,236 19,228
refining fees
Realised losses on economic 337 2,161 615 8,615
hedges
Realised losses on gold hedges - 1,331 - 1,331
Royalty expense 12,213 12,895 30,895 35,429
Depreciation and amortisation* 22,982 41,702 80,941 120,078
Total 105,538 175,327 349,505 530,766
Total cost of sales 105,538 175,327 349,505 530,766
Deduct: Depreciation and (22,982) (41,702) (80,941) (120,078)
amortisation*
Deduct: Realised losses on gold - (1,331) - (1,331)
hedges
Deduct: Co-product revenue (774) (8,798) (6,579) (29,131)
Total cash cost 81,782 123,496 261,985 380,226
Total ounces sold 132,787 206,488 445,225 607,451
Total cash cost per ounce sold 616 598 588 626
*Depreciation and amortisation includes the depreciation component of the cost
of inventory sold
All-in sustaining cost (AISC) is a non-IFRS financial measure. The measure is
in accordance with the World Gold Council's guidance issued in June 2013. It is
calculated by taking cash cost per ounce sold and adding corporate
administration costs, share-based payments, reclamation and remediation costs
for operating mines, corporate social responsibility expenses, mine exploration
and study costs, realised gains and/or losses on operating hedges, capitalised
stripping and underground development costs and sustaining capital expenditure.
This is then divided by the total ounces sold. A reconciliation between cash
cost per ounce sold and AISC for the key business segments is presented below:
(Unaudited) Three months ended 30 September 2017 Three months ended 30 September
2016
(US$/oz sold) Bulyanhulu North Buzwagi Group* Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per 863 550 564 616 808 364 986 598
ounce sold
Corporate 60 28 50 51 30 20 29 29
administration
Share based (8) (2) (3) (5) 8 7 11 97
payments
Rehabilitation 21 11 6 12 8 8 2 7
CSR expenses 10 17 8 16 8 17 20 14
Capitalised 310 194 - 170 347 199 - 200
development
Sustaining capital 109 66 70 79 91 40 28 53
Total AISC 1,365 864 695 939 1,300 655 1,076 998
* The group total includes a cost of US$16/oz of unallocated corporate related
costs in Q3 2017, and a cost of US$95/oz in Q3 2016.
(Unaudited) Nine months ended 30 September 2017 Nine months ended 30 September 2016
(US$/oz sold) Bulyanhulu North Buzwagi Group* Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per 812 473 647 588 700 402 1,030 626
ounce sold
Corporate 42 25 49 43 23 22 26 26
administration
Share based (5) (2) (5) (19) 10 7 11 65
payments
Rehabilitation 17 11 6 11 7 9 3 7
CSR expenses 9 10 8 13 6 14 11 13
Capitalised 365 189 - 195 230 189 - 166
development
Sustaining capital 106 68 37 76 81 51 27 58
Total AISC 1,346 774 742 907 1,057 694 1,108 961
* The group total includes a cost of US$1/oz of unallocated corporate related
costs in Q3 YTD 2017, and a cost of US$63/oz in Q3 YTD 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.
Where reference is made to AISC per ounce produced, this is calculated in a
similar manner as set out above, but adjusted for the impact of the change in
inventory charge/credit relating to finished gold inventory. This recalculated
number is then divided by ounces produced.
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 Nine months ended 30
September September
(Unaudited) 2017 2016 2017 2016
Net profit for the period 16,038 52,787 78,581 46,659
Plus income tax expense 8,561 27,970 45,563 135,714
Plus depreciation and amortisation 22,982 41,702 80,941 120,078
*
Plus finance expense 2,982 3,023 8,436 8,403
Less finance income (261) (657) (1,804) (1,147)
EBITDA 50,302 124,825 211,717 309,707
*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 (f) 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 Nine months ended 30
September September
(Unaudited) 2017 2016 2017 2016
Net earnings 16,038 52,787 78,581 46,659
Adjusted for:
Restructuring costs(a) 2 15,399 800 18,703 2,925
One off legal settlements (b) 3,583 - 5,083 -
Insurance settlements(c) - (3,500) - (3,500)
Reduced operational costs(d)3 7,411 - 7,411 -
Discounting of indirect taxes(e) - - - (6,508)
Prior year tax positions - - - 69,916
recognised(f) 1
Tax impact of the above (7,918) 811 (9,359) 173
Adjusted net earnings 34,513 50,898 100,419 109,665
1 For the year ended 31 December 2016, US$69.9 million represents a provision
raised for the implied impact of an adverse tax ruling made by the Tanzanian
Court of Appeal with respect to historical tax assessments of Bulyanhulu. As
reported in Q1 2016, the impact of the ruling was calculated for Bulyanhulu and
extrapolated to North Mara and Tulawaka as well and covers results up to the
end of 2015. On a site basis, US$35.1 million was raised for Bulyanhulu,
US$30.4 million for North Mara and US$4.4 million for Tulawaka.
2 Restructuring costs for Q3 2017 mainly consist of severance costs incurred as
part of the Bulyanhulu reduced operations programme.
3 Reduced operational costs for Q3 2017 relate primarily to one-off contractor
exit costs and inventory writedowns incurred as part of the Bulyanhulu reduced
operations programme.
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 and is calculated by deducting total borrowings
from cash and cash equivalents.
Mining statistical information - the following describes certain line items
used in Acacia'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.
ACACIA MINING : 3rd Quarter Results
October 20, 2017 at 02:01 am EDT
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