LSE: ABG. Fourth Quarter Report for the three months ended 31 December 2010

Transcription

1 LSE: ABG Fourth Quarter Report for the three months ended 31 December 2010 Based on IFRS and expressed in US Dollars African Barrick Gold plc ( ABG ) reports fourth quarter production results Gold production of 179,730 ounces in the quarter, up 9% on the third quarter Highlights Q4 gold production of 179,730 ounces improved over the quarter as Buzwagi overcame its production difficulties by mid- November and the other operations performed well against plan. Production for the full year was 700,934 ounces. Q4 ounces sold for the quarter was 201,298 ounces and 724,083 ounces for the full year which represents 6% growth on the prior year. The increased sales and the average realised gold price of $1,394 per ounce sold over the quarter and $1,240 per ounce for the full year have had a very positive impact on the earnings and cash flow of the Company over Costs per ounce for the quarter are expected to be in line with the previous quarter, mainly as a result of additional expenses incurred at Buzwagi, but the increased sales and realised prices resulted in a year end cash position of approximately $401 million. Initial high grade underground resource declared at North Mara under the Gokona and Nyabigena pits. Successful drill hole intercepts at the Nyanzaga Project indicating higher grades at depth with additional near surface mineralisation, supportive of resource base expansion. $150m credit facility finalised during the quarter, providing additional financial flexibility. African Barrick Gold plc Three months ended Twelve months ended 31 December 31 December Operating results Tonnes mined (thousands of tonnes) 9,794 10,304 40,016 36,781 Ore tonnes processed (thousands of tonnes) 2,023 1,951 7,706 6,546 Recovery rate (percent) 87.0% 86.2% 86.1% 87.0% Average grade (grams per tonne) Attributable gold production (ounces) 1 179, , , ,306 Attributable gold sold (ounces) 1 201, , , ,687 Average realised gold price per ounce sold ($) 2 1,394 1,093 1, Copper production (thousands of pounds) 2,100 2,082 7,958 6,788 1 Production and sold ounces reflect equity ounces which exclude 30% of Tulawaka s production base. 2 Average realised gold price per ounce sold is a non-ifrs financial performance measure with no standard meaning under IFRS Commenting on the results, CEO Greg Hawkins said: Over the fourth quarter we have seen the positive impact of the corrective actions taken at Buzwagi, with December production around 20,000 ounces, as expected. With our other operating mines also delivering in line with expectations, our portfolio of growth projects showing encouraging progress and a strong capital position to provide us with balance sheet flexibility, we enter 2011 well positioned to deliver on the potential of the Company s asset base. For further information, please visit our website: or contact: 1 LSE: ABG

2 African Barrick Gold plc Greg Hawkins, CEO Kevin Jennings, CFO Andrew Wray, Head of investor Relations & Corporate Devt. +44 (0) Finsbury (Financial public relations firm) +44 (0) Andrew Mitchell Charles Chichester About ABG ABG is headquartered in London and is listed on the Main Market of the London Stock Exchange under the symbol ABG. ABG is the largest gold producer in Tanzania and the fifth largest in Africa, growing from no production in 2000 to approximately 701,000 attributable ounces in 2010, with 16.8 million ounces of reserves. It has four producing mines, all located in northwest Tanzania, and seven principal exploration projects. ABG has substantial gold mining experience and expertise, from exploration and development to mine construction and operation. It has modern, well-invested operations that have benefited from the experience, technology and high standards of its majority shareholder, Barrick Gold Corporation ( Barrick ). ABG s four mines are: Bulyanhulu: an underground gold mine, which began production in April 2001; Buzwagi: an open pit gold mine, which began production in May 2009; North Mara: an open pit gold mine consisting of three open pit deposits, which began production in April 2002; and Tulawaka: an open pit gold mine that has transitioned to an underground operation, which began production in June ABG's recent exploration focus has been on advancing the exploration opportunities around its existing mines in order to increase ABG's reserves and resources. Historically and prior to ABG's listing on the London Stock Exchange, the operations of ABG comprised the Tanzanian gold mining business of Barrick. Conference call There will be a conference call for analysts and investors on 18 th January 2011 at 1pm London time. The dial in details are as follows: Participant dial in: Password: +44 (0) or UK toll free ABG Q4 Production Results There will be a replay facility available until 25 January Access details are as follows: Replay number: +44 (0) Replay PIN: # 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, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words plans, expect, anticipates, believes, intends, estimates and other similar expressions. All forward-looking statements involve a number of risks, uncertainties and other factors. Although ABG s management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of ABG, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements contained in this report. Factors that could cause or contribute to differences between the actual results, performance and achievements of ABG include, but are not limited to, political, economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the US dollar; South African rand and Tanzanian shilling exchange rates), ABG 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 timely and successfully process its mineral reserves, risk of trespass, theft and vandalism, changes in its business strategy, as well as risks and hazards associated with the business of mineral exploration, development, mining and production. Accordingly, Investors should not place reliance on forward-looking statements contained in this report. The forward-looking statements in this report reflect information available at the time of preparing this report. Subject to the requirements of the Disclosure and Transparency Rules and the Listing Rules or applicable law, ABG explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward- looking statements in this report that may occur due to any change in ABG s expectations or to reflect events or circumstances after the date of this report. No statements made in this report regarding expectations of future profits are profit forecasts or estimates, and no statements made in this report should be interpreted to mean that ABG s profits or earnings per share for any future period will necessarily match or exceed the historical published profits or earnings per share of ABG or any other level. 2 LSE: ABG

3 Operating update for the three months ended 31 December 2010 Attributable gold production for the quarter totalled 179,730 ounces, a 16% decrease compared to 213,588 ounces in the corresponding quarter of During the quarter both Bulyanhulu and North Mara continued to perform in line with expectations and showed stable production results. The decrease in production was primarily due to the impact of the actions taken to address the fuel theft at Buzwagi, which were particularly notable in October and the first part of November. Production at Buzwagi recovered over the remainder of November and December to the levels anticipated. Production at Tulawaka was 14% lower than the prior year period due to lower grade from both underground as well as stockpiled material. Gold ounces sold for the quarter were 201,298 ounces, 12% higher than the production figure and an increase of 2% compared to 197,927 in the corresponding quarter of This increase was primarily the result of selling unsold gold concentrate from Bulyanhulu, bringing the year end finished gold inventories back to normalised levels. Tonnes mined for the quarter were 9.8 million compared to 10.3 million in the corresponding quarter of The decrease was driven primarily by the reduction in tonnes mined at Buzwagi, partially offset by North Mara s focus on waste stripping at the Gokona open pit. Tonnes processed for the quarter of 2.0 million were at the same level as the corresponding quarter of The average grade processed for the quarter was 3.2 grams per tonne which was 19% lower than the prior year period of 3.9 grams. The decrease was primarily due to the processing of low grade stockpiles at Buzwagi as a result of the actions taken in response to the fuel theft, the reduction in head grade at Bulyanhulu and the low grade associated with stockpiles at North Mara. Copper production for the quarter was 2.1 million pounds, in line with the corresponding quarter of For the full year, production of 700,934 ounces represented a 2% decline on the prior year period. By achieving our objective of selling our concentrate inventories before the year end, gold sold was 3% higher than production and drove cash flow during the quarter, enabling us to end the year with a net cash position of $401 million. Exploration Update Exploration and development during the quarter continued to focus on ABG s strategy of organic growth through near-mine exploration, resource expansion, optimization of existing assets through identification and delineation of higher grade satellite deposits, regional exploration for new discoveries and evaluation of acquisition opportunities throughout Africa. The Exploration and Technical Services teams have been principally focused on advancing the organic growth projects around each of the current Tanzanian operations, as well as advancing the exploration programs at North Mara and Nyanzaga (Tusker and Kilimani). Good progress has been made on all projects. Nyanzaga Project At the Nyanzaga Project, infill and step-out reverse circulation and diamond core drilling continued on the Tusker-Kilimani resource area. The drill programme is also testing geophysical and geochemical targets across the Nyanzaga project area for large-scale gold deposits and additional satellite opportunities within 15km of the Tusker resource area. Step-out and infill drilling on the southern strike extensions of the Tusker prospect has identified wide, higher-grade extensions of gold mineralization. These recent intercepts indicate that mineralization on the southern extensions of Tusker occurs closer to surface than previously modelled, and, at the same time, the deeper intersections indicate the potential for grade to increase with depth in this area of the system. Given the success of the drill programme to date, the current step-out drilling is being expanded to allow accelerated follow-up of these positive intersections so far. A key element of this will be to scope out the upside potential of higher grade zones at depth given that the system remains open at depths below 400m vertical. North Mara Underground At North Mara, a high-grade initial underground resource of 8.29g/t Au beneath the planned final Gokona and Nyabigena open pits has been delineated and validated following an earlier scoping study. This is the first step in evaluating the economic potential of developing an underground operation at North Mara. In addition, a significant resource drill-out programme is scheduled to commence early in 2011 aimed at expanding the total underground resource to greater than 1Moz. The resource confirms the encouraging progress on assessing the upside potential of North Mara and improves the potential to increase production and extend the mine life. The feasibility study to assess the Gokona-Nyabigena underground potential is on schedule for completion in mid Exploration drill programmes are ongoing at Gokona to investigate extensions of these underground deposits and to test for additional high-grade shoots, particularly between Gokona West and Gokona East Deeps lodes. The exploration drilling is close to completion, and an extensive (62,000m) infill drill programme at Gokona will commence early in 2011 to better delineate mineralization. In addition, these programmes will also be used to improve the level of confidence in the economic viability of the project. 3 LSE: ABG

4 North Mara - Gokona Corridor The Gokona Corridor represents approximately 15km of untested stratigraphy northwest of Gokona and southeast of Nyanbigena open pit deposits and the wide-spaced scout drilling is testing for favourable lithologies, alteration and surface gold anomalies that would warrant more detailed follow-up drilling. Phase I of reverse circulation scout drilling was completed during the quarter with a further 25 broad-spaced holes drilled along trend for the Gokona and Nyabigena deposits. To date, several RC holes have intersected anomalous gold zones (100ppb Au) along with encouraging zones of alteration and veining, Golden Ridge The Golden Ridge Project feasibility study continued throughout the quarter. It has been decided to complete some additional ground surveying at the project and subsequently update the geological model which was prepared on the basis of the 2010 infill drilling and metallurgical test work. Once this is complete a resource for the project will be released. Based on the results of the 2010 drilling and the current modelling of the Golden Ridge mineralisation there is potential to increase resources at Golden Ridge further, both adjacent to and below the current pit design. Additional infill and step out drilling is both warranted and required between the main and southern pit resource areas, along strike to the north, and at depth targeting higher-grade shoots. Tulawaka East Zone Underground Extensions During the quarter diamond drilling continued from the Level 7 Access drill drive. Drilling continued to focus on extensions to high grade shoots with Zones below Levels 9 and 10. Quartz veining encountered in a number of the drill holes showed visible gold. Diamond drilling continues to test depth, plunge and strike extensions to the mineralised lodes throughout the East Zone and is focused on increasing reserves and resources. The underground diamond drill programme is expected to continue throughout 2011 with the aim of extending known high grade zones and delineating additional resources below the current drilling. We will provide a more detailed update on the future of Tulawaka at the time of our preliminary results next month. Bulyanhulu Bulyanhulu Upper East The feasibility study for the Upper East project continued during the quarter, as did rehabilitation and dewatering work in this zone. The feasibility study is scheduled for completion during the first half of Bulyanhulu Reef 1 and 2 West During the quarter several RC drilling programmes were completed on poorly tested areas of Reef 2 West along with Reef 1 and Reef 0b targets. The programme primarily targeted near-surface extensions of Reef 1 and 2 approximately 1km to the west of current underground mining activities and the drilling has intercepted Reef 2 stratigraphy and mineralised structures. Favourable results from this program warrant a second phase of follow up drilling in order to identify additional near surface resources for either open-pit or underground mining. Deeper drill holes targeting extensions of higher grade zones will be targeted in early 2011 from the existing underground development at Bulyanhulu. Other developments Credit facility On 24 November 2010, ABG and its wholly owned subsidiary BarbCo One Ltd concluded negotiations with a syndicate of commercial banks, led by Citibank, for the provision of a revolving credit facility in a maximum aggregate amount of $150 million. The facility has been provided to service the general corporate needs of the ABG Group and to fund potential acquisitions. All provisions contained in the credit facility documentation have been negotiated on an arm's length basis and on normal commercial and customary terms for such finance arrangements. The term of the facility is 24 months and when drawn the spread over libor will be 350 basis points. 4 LSE: ABG

5 Mine site summary Bulyanhulu Three months ended Twelve months ended (in $ '000) 31 December 31 December Underground ore tonnes hoisted Kt Ore milled Kt Head grade g/t Mill recovery % 91.7% 92.2% 92.2% 92.1% Ounces produced Oz 68,619 72, , ,991 Ounces sold Oz 84,785 73, , ,121 Gold production at Bulyanhulu for the quarter was 68,619 ounces which was slightly lower than the prior year period of 72,137. The lower production was primarily due to hoisting lower ore tonnes than planned from the high grade sill pillars because of geotechnical considerations negatively impacting head grade processed and mill recoveries. This was partly offset by higher ore tonnes hoisted. Gold ounces sold for the quarter were 84,785 which was 24% higher than the production figure. The difference was due to selling all unsold gold concentrate from the third quarter bringing the year end finished gold inventories back to normalised levels. For the full year 2010, gold production at Bulyanhulu was 4% higher than the prior year, mainly due to the improved grade profile achieved in Gold ounces sold for the year were in line with production at 262,442 ounces, which was 3% higher than North Mara Three months ended Twelve months ended (in $ '000) 31 December 31 December Tonnes mined Kt 4,969 4,631 20,106 15,888 Ore tonnes mined Kt 610 1,154 2,624 4,933 Ore milled Kt ,860 2,605 Head grade g/t Mill recovery % 84.7% 81.7% 82.9% 79.7% Ounces produced oz 54,973 61, , ,358 Ounces sold oz 57,300 57, , ,495 Gold production for the quarter at North Mara was 54,973 ounces, compared to the prior year period figure of 61,350 ounces due to lower grade offset by higher mill throughput and recoveries. The Q grade of 2.6 g/t compared negatively to the Q grade of 3.6g/t as a result of processing a higher proportion of lower grade stockpiled ore to supplement lower production from the Nyabirama and Nyabigena open pits as mining ceased in these zones. The focus in 2011 will turn to completing the Gokona stage 2 push back to access high grade ore in 2013 as well as starting with the Nyabirama push back. The processing plant throughput of 765,000 tonnes was 15.8% higher than the previous year and 7% above the current design capacity for the quarter owing to high mill uptime and a favourable ore mix. Gold ounces sold for the quarter were 57,300, slightly higher than the production of 54,973 ounces and in line with the prior year s ounces sold of 57,185. Production for the full year 2010 of 212,947 ounces was in line with the prior year period, whilst gold ounces sold of 218,684 were up 4% compared to the prior year period. 5 LSE: ABG

6 Buzwagi Three months ended Twelve months ended (in $ '000) 31 December 31 December Tonnes mined Kt 4,510 5,399 18,848 19,843 Ore tonnes mined Kt 1,167 1,261 4,285 5,034 Ore milled Kt ,553 2,671 Head grade g/t Mill recovery % 81.6% 83.4% 81.0% 87.4% Ounces produced oz 44,257 66, , ,031 Ounces sold oz 45,706 52, , ,682 Gold production at Buzwagi for the quarter was 44,257 ounces compared to 66,357 ounces in the prior year period. The lower production compared to the prior year was a result of the impact of the mining personnel terminated following the discovery of systematic onsite fuel theft during the third quarter as well as processing a different mix and grade of ore. Management has focused efforts on the training of new mining personnel, completing the tailings storage lift and increasing equipment availability while managing mill downtime from unplanned power outages, which remain an ongoing issue. Production improved significantly over the second half of November and December as the operational measures taken during the year, together with the newly trained personnel, had the planned effect. Gold ounces sold during the quarter amounted to 45,706, in line with production and 12% lower than the prior year period reflecting the lower production base. Gold production for the full year of 186,019 ounces was in line with the prior year, when commercial production started during the second quarter. Gold ounces sold for the year amounted to 198,221 an increase of 29% compared to the prior year. This was due to the contained gold in circuit which was fed into the process at the start of production in Tulawaka (reflected as 70%) Three months ended Twelve months ended (in$ '000) 31 December 31 December Underground ore tonnes hoisted Kt Ore milled Kt Head grade g/t Mill recovery % 93.2% 93.8% 93.2% 94.1% Ounces produced oz 11,881 13,746 42,094 65,926 Ounces sold oz 13,507 15,224 44,736 65,389 Attributable gold production at Tulawaka for the quarter was 11,881 ounces compared to the prior period of 13,746 ounces. The lower gold production during the quarter compared to the prior year period was the result of mining lower grade ore from the underground pit and processing lower grade material from the stockpiles than in Q A key focus of mine management has been on exploration and definition drilling to expand the existing reserve and resource base in order to extend the mine life beyond July Our plan is to provide further detail on the progress of this at the time of our preliminary results. Gold ounces sold amounted to 13,507 for the quarter, slightly ahead of production and down 11% compared to Q4 2009, reflecting the decline in production. For the year, the figure was 44,736 ounces, again slightly ahead of production and down on the prior year period in line with the drop in production. 6 LSE: ABG

7 Non-IFRS financial measures ABG has identified certain non-ifrs financial measures in this report. Non-IFRS financial measures disclosed by management in this report are provided as additional information to investors in order to provide them with an alternative method for assessing ABG s financial performance and operating results. 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. Average realised gold price per ounce sold is a non-ifrs financial measure which excludes from sales: -Unrealised gains and losses on non hedge derivative contracts -Unrealised mark to market gains and losses on provisional pricing from copper and gold sales contracts; and -Export duties Cash costs per ounce sold is a non-ifrs financial measure. Cash costs include all costs absorbed into inventory, as well as royalties, byproduct 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. The presentation of these statistics in this manner allows ABG to monitor and manage those factors that impact production costs on a monthly basis. ABG calculates cash costs based on its equity interest in production from its mines. Cash costs per ounce sold are calculated by dividing the aggregate of these costs by gold ounces sold. Cash costs and cash costs per ounce sold are calculated on a consistent basis for the periods presented. Mining statistical information The following describes certain line items used in the ABG 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. - Total tonnes mined include open pit material plus underground ore tonnes hoisted. - Strip ratio measures the ratio 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. 7 LSE: ABG