ALACER GOLD CORP. For The Year Ended December 31, 2015
The following management discussion and analysis ("MD&A") is as of February 8, 2016 and relates to the financial condition and results of operations of Alacer Gold Corp. and its subsidiaries ("Alacer", the "Group" or the "Corporation") as of December 31, 2015. The MD&A supplements and complements the Corporation's audited annual consolidated financial statements for the year ended December 31, 2015 (the "consolidated financial statements") and related notes. Other relevant documents to be read with this MD&A include the Corporation's audited annual consolidated financial statements, the MD&A, and the Annual Information Form ("AIF"), all for the year ended December 31, 2014. Comparison herein is provided to the year ended December 31, 2014. Readers are cautioned that the MD&A contains forward‐ looking statements and that actual events may vary from Management's expectations. Readers are encouraged to read the Cautionary Statements included within this MD&A and to consult the Corporation's consolidated financial statements for the year ended 2015 and related notes, which are available on the Corporation's web site at www.alacergold.com and on SEDAR at www.sedar.com. The December 31, 2015 consolidated financial statements and MD&A are presented in U.S. Dollars ("USD") and have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). References to non-IFRS measures are made throughout this MD&A. For further information and detailed reconciliations, see the "Non-IFRS Measures" section of this MD&A. This discussion and analysis addresses matters the Corporation considers important for an understanding of our financial condition and results of operations as of and for the year ended December 31, 2015, as well as our outlook for 2016.
Investments in Mineral Properties and Equipment 6
Summary of Quarterly Results 15
Liquidity and Capital Resources 15
Business Conditions and Trends 17
Transactions with Related Parties 19
Critical Accounting Policies, Estimates and Accounting Changes 19
Financial Instruments and Other Instruments 21
Alacer is a leading intermediate gold mining company, with an 80% interest in the world-class Çöpler Gold Mine in Turkey operated by Anagold Madencilik Sanayi ve Ticaret A.S. ("Anagold") and owned 20% by Lidya Madencilik Sanayi ve Ticaret A.S. ("Lidya Mining"). The Corporation's primary focus is to leverage its cornerstone Çöpler Mine and strong balance sheet to maximize portfolio value, maximize free cash flow, minimize project risk and, therefore, create maximum value for shareholders.
Alacer is actively pursuing initiatives to enhance value beyond the current mine plan:
Çöpler Oxide Production Optimization - expansion of the existing heap leach pad to 58 million tonnes remains on track. Approximately 70% of the Heap Leach Pad Phase 4 ("HLP4") expansion area is within the existing mine permit area and that portion is currently under construction. The remaining 30% of the area necessary for final construction requires an additional land use permit that is currently awaiting final approval. The Corporation continues to evaluate opportunities to optimize and extend oxide production beyond the current reserves, including a new heap leach pad site to the west of the Çöpler Mine.
Çöpler Sulfide Project - the Sulfide Project will deliver medium-term growth with robust financial returns and adds 22 years of production at Çöpler. The Sulfide Project will bring Çöpler's remaining Life-of-Mine gold production to 3.7 million ounces at industry low All-in Sustaining Costs1 averaging $637 per ounce. An Environmental Impact Assessment was approved in December 2014 and land use permits have progressed through the regulatory process and are awaiting final approval. Receipt of land use permits and final Board of Directors' approval is required to advance the Sulfide Project construction. The Corporation continues detailed engineering and procurement of long-lead time items and a Project update will be provided later in the first quarter of 2016.
The Corporation continues to pursue opportunities to further expand its current operating base to become a sustainable multi-mine producer with a focus on Turkey. The systematic and focused exploration efforts in the Çöpler District to locate additional oxide deposits, as well as in other regions of Turkey are progressing. Drilling and metallurgy work to advance the Dursunbey project in western Turkey is continuing.
Detailed information regarding the Çöpler Sulfide Project can be found in the Technical Report dated March 27, 2015 available on SEDAR at www.sedar.com and on the Corporation's website.
Alacer is a Canadian corporation incorporated in the Yukon Territory with its primary listing on the Toronto Stock Exchange. The Corporation also has a secondary listing on the Australian Stock Exchange where CDIs trade.
1 All-in Sustaining Costs are a non-IFRS financial performance measure with no standardized definition under IFRS. For further information and a detailed reconciliation, please see the "Non-IFRS Measures" section of this MD&A.
An updated NI 43-101 Technical Report was issued on March 30, 2015, increasing Çöpler's reserves and increasing Life-of-Mine gold production by over 800,000 ounces.
On December 9, 2015, the Corporation released the results of its exploration drilling program from several areas within the Çöpler District indicating favorable metallurgy and rapid development potential.
The Corporation signed a $250 million, 7-year term senior secured project finance facility on September 21, 2015, for the expansion of the Çöpler Gold Mine, with no mandatory hedging and interest rates of LIBOR plus 2.5% to 2.95%.
In early Q2 2015, Turkish authorities approved a third incentive certificate that will generate significant cash tax credits from eligible expenditures on the Sulfide Project and Heap Leach Pad Phase 4 expansion.
On April 9, 2015, the Corporation announced the Board of Directors approved advancement of the Çöpler Sulfide Project into detailed engineering and procurement of long-lead time items, which has continued to progress throughout the year; initial earthworks commenced during Q3 2015.
A Letter of Intent was signed on July 17, 2015, with Air Liquide to commence the detailed engineering work for the Sulfide Project Oxygen Plant which will form the basis for a construction and long-term gas supply and operating contract.
On January 14, 2016, the Corporation announced it will move forward with a twin horizontal autoclave approach, on an Engineering, Procurement and Construction Management ("EPCM") basis, to achieve optimal risk-adjusted results for the Sulfide Project.
On February 11, 2015, the Corporation announced the suspension of its dividend policy due to capital expenditure commitments, including the Sulfide Project.
OperationalOn August 19, 2015, the Çöpler Gold Mine produced its one millionth ounce of gold.
On December 31, 2015, the Çöpler Gold Mine achieved 1,041 days, or over 7.9 million man-hours without a lost-time injury ("LTI"). On January 11, 2016, a drilling contractor injured a hand resulting in an LTI.
Gold production was 204,665 ounces and attributable gold production1 was 163,732 ounces.
Total Cash Costs per ounce (C2) were $482 and All-in Sustaining Costs per ounce were $690.
Expansion of the heap leach pad continues to advance; initial stacking of ore on the expansion area occurred in June 2015.
Sulfide stockpiles at year end were 5.1 million tonnes at an average grade of 3.67 g/t gold or approximately 600,000 contained gold ounces.
FinancialThe Corporation ended 2015 with cash of $360.7 million.
An undrawn finance facility of $250 million is in place.
Working capital increased to $403.9 million at year end.
Cash flow from operating activities totaled $107.9 million.
Attributable net profit1 was $46.6 million or $0.16 per share.
1 Attributable gold production and net profit are reduced by the 20% non-controlling interest at the Çöpler Gold Mine.
As announced in the press release dated January 14, 2016 titled "Alacer Gold Meets 2015 Production Guidance, Provides 2016 Guidance and an Update on the Çöpler Sulfide Project", the Corporation expects to produce between 150,000 to 170,000 gold ounces at All-in Sustaining Costs per ounce of $780 to $830.
Assumptions underlying Alacer's 2016 outlook include the Mineral Reserves and Mineral Resources as set out in the Technical Report, depleted to December 31, 2015, a gold price of $1,100 per ounce and a USD to Turkish Lira ("TRY") foreign exchange rate of 2.85.
Sustaining capital expenditure (100%) for 2016 is forecast to be approximately $13 million, of which $10 million relates to the HLP4 expansion. Çöpler sulfide growth capital expenditure for 2016 is currently forecast to be approximately $315 million, pending receipt of the land use permits and final Board of Directors' approval.
The 2016 forecast for exploration expenditure (100%) is approximately $25 million with $10 million attributable.
Çöpler gold production of 150,000 to 170,000 ounces
Total Cash Costs (C2)1 of $575 to $625 per ounce
All-in Sustaining Costs1 of $780 to $830 per ounce
Çöpler sustaining capital expenditures of $13 million
Çöpler sulfide growth capital expenditure of $315 million
Exploration expenditure of $25 million ($10 million attributable)
1 Total Cash Costs per ounce (C2) and All-in Sustaining Costs per ounce are non-IFRS financial performance measures with no standardized definitions under IFRS. For further information and detailed reconciliations, see the "Non-IFRS Measures" section of this MD&A.
Alacer Gold Corp. issued this content on 08 February 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 08 February 2016 23:28:12 UTC
Original Document: http://www.alacergold.com/docs/default-source/press-releases/q4-md-a.pdf?sfvrsn=0
