Acacia Mining plc ( ACA ) reports fourth quarter production results

Transcription

1 2 January 206 Fourth Quarter Production Report for the three months ended 205 Based on IFRS and expressed in US Dollars (US$) Acacia Mining plc ( ACA ) reports fourth quarter production results We are pleased to report a strong fourth quarter with production of 200,723 ounces, driven by the planned step up at Bulyanhulu, all-in sustaining cost of US$,004 per ounce sold and a return to free cash flow, said Brad Gordon, Chief Executive Officer of Acacia. All three assets performed during the quarter, with Bulyanhulu delivering production of 78,223 ounces, a 26% increase over the previous quarter. As a result of the strong performance, which was achieved whilst undertaking a significant labour restructuring, full year production of 73,92 ounces was 2% ahead of 204. Due to the improved performance, full year all-in sustaining cost (AISC) of US$,2 per ounce was in line with 204. Looking ahead to 206, we expect to see a further increase in group production to 750, ,000 ounces at significantly reduced AISC of US$ per ounce. We continue to focus on reducing our cost base to ensure our assets are able to generate free cash flow in the current gold price environment. Highlights Q4 205 gold production of 200,723 ounces and gold sales of 98,67 ounces Preliminary Q4 205 AISC of US$,004 per ounce sold, 6% lower than Q3 205 Bulyanhulu delivered production of 78,223 ounces at a preliminary AISC of US$999 per ounce Full year 205 gold production of 73,92 ounces, 2% above 204, with full year sales of 72,203 ounces Preliminary full year 205 AISC of US$,2 per ounce sold, in line with 204 Cash balance increased by US$7 million during the quarter, despite incurring US$7 million of retrenchment costs, to end the year at approximately US$233 million Guiding for increased production in 206 of 750, ,000 ounces at significantly reduced AISC of US$ per ounce sold o Bulyanhulu 206 production expected to be in line with 205, at substantially lower AISC. o Continue to believe the mine has the potential to achieve production of 350,000 ounces per annum o Reduced group cash cost of US$ per ounce sold o Further reduction in capital expenditure to US$75-80 million Key Statistics Three months ended Year ended (Unaudited) Tonnes mined (thousands of tonnes) 0,28 0,776 4,390 4,684 Ore tonnes mined (thousands of tonnes) 2,822 2,28 0,3 8,70 Ore tonnes processed (thousands of tonnes) 2,43 2,405 9,268 8,43 Process recovery rate (percent)* 87.5% 85.5% 87.4% 88.0% Head grade (grams per tonne)* Gold production (ounces) 200,723 8,084 73,92 78,65 Gold sold (ounces) 98,67 94,243 72, ,680 Copper production (thousands of pounds) 4,496 3,07 4,98 4,068 Cash cost (US$/ounce) AISC (US$/ounce),004,088,2,05 Average realised gold price (US$/ounce),07,94,54,258 Capital expenditure (US$ 000) 2 42,93 60,62 83,67 262,793 These are non-ifrs measures. Refer to page 8 for definitions 2 Excludes non-cash capital adjustments (reclamation asset adjustments), includes finance lease purchases and land purchases treated as long term prepayments *Reported process recovery rates and head grade include tailings retreatment at Bulyanhulu

2 Presentation and Conference call A presentation and conference call will be held for analysts and investors on 2 January 206 at 09:00 London time. The access details for the conference call are as follows: Participant dial in: +44 (0) / Password: Acacia A recording of the conference call will be made available on the Company s website,, after the call. For further information, please visit our website: or contact: Acacia Mining plc +44 (0) Brad Gordon, Chief Executive Officer Andrew Wray, Chief Financial Officer Giles Blackham, Investor Relations Manager Bell Pottinger +44 (0) Daniel Thöle About Acacia Mining plc Acacia Mining plc (), is Tanzania s largest gold miner and one of the largest producers of gold in Africa. We have three producing mines, all located in Northwest Tanzania: Bulyanhulu, Buzwagi, and North Mara and a portfolio of exploration projects in Tanzania, Kenya, Mali and Burkina Faso. Our approach is focused on strengthening our core pillars; our business, our people and our relationships; whilst continuing to invest in our future. Our name change from African Barrick Gold to Acacia Mining in 204 reflected a new approach to mining, and an ambition to create a leading African Company. Acacia Mining 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 remains our majority shareholder. Acacia Mining reports in US dollars and in accordance with IFRS as adopted by the European Union, unless otherwise stated in this announcement. 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 assu mptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, projects, and statements re garding future performance. Forward-looking statements are generally identified by the words plans, expects, anticipates, believes, int ends, 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 c ould cause actual results and developments to differ materially from those expressed in, or implied by, the forward-looking statements contained i n this report. Factors that could cause or contribute to differences between the actual results, performance and achievements of Acacia include, b ut are not limited to, changes or developments in political, economic or business conditions or national or local legislation or regulation in countrie s in which Acacia conducts - or may in the future conduct - business, industry trends, competition, fluctuations in the spot and forward price of gol d or certain other commodity prices (such as copper and diesel), currency fluctuations (including the US dollar, South African rand, Kenyan shillin g 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 min eral reserves successfully and in a timely manner, Acacia s ability to complete land acquisitions required to support its mining activities, operation al or technical difficulties which may occur in the context of mining activities, delays and technical challenges associated with the completion of pr ojects, 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 affect ing the gold mining industry in general. Although Acacia s management believes that the expectations reflected in such forward-looking statement s are reasonable, Acacia cannot give assurances that such statements will prove to be correct. Accordingly, investors should not place reliance o n forward-looking statements contained in this report. Any forward-looking statements in this report only reflect information available at the time of preparation. Subject to the requirements of the Disclo sure and Transparency Rules and the Listing Rules or 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 sh ould be construed as a profit forecast or estimate and no statement made should be interpreted to mean that Acacia s profits or earnings per shar e for any future period will necessarily match or exceed the historical published profits or earnings per share of Acacia. 2

3 Operating update for the three months ended 205 Gold production for the quarter totalled 200,723 ounces, an % increase on the corresponding quarter of 204. The increase in production was predominantly driven by increased throughput and recoveries at Bulyanhulu and improved grades and recoveries at North Mara. Gold ounces sold for the quarter were 98,67 ounces, a 2% increase from the corresponding quarter of 204. Gold ounces sold were % lower than gold produced as a result of the impact of the timing of concentrate production at Buzwagi. At Bulyanhulu, total production amounted to 78,223 ounces, including,349 ounces from reprocessed tailings, 8% ahead of Q Production from the run-of-mine was 3% ahead of Q4 204, driven by a 9% increase in throughput as a result of an improvement in underground ore tonnes hoisted and a 6% increase in recovery rate as a result of improvements in elution circuit performance, partially offset by 3% lower grades. At North Mara, gold production of 77,304 ounces was 9% higher than in Q4 205 as head grade increased by 9% compared to Q4 204 due to an increased proportion of higher grade ore delivered from the Gokona Underground, which more than offset the lower open pit grade from Nyabirama. The Gokona Underground ramped up to full production rates during the quarter with mined grade increasing to 8.7 grams per tonne due to the increased proportion of stoping ore in relation to total underground ore production. At Buzwagi, gold production of 45,95 ounces was 2% higher than in Q4 204, driven by marginal improvements in throughput and recovery rates. Operations continued to focus on lower grade splay materials as we look to open up access to higher grade areas in the main ore zone in 206. Total tonnes mined for the quarter were 0. million compared to 0.8 million in the corresponding quarter of 204 primarily due to equipment availability impacting on waste mining rates at Buzwagi. Ore tonnes mined of 2.8 million were 24% higher than Q4 204 as a result of improved access to ore areas at Buzwagi and increased ore at North Mara delivered from the Gokona Underground and from the ramp up of mining in the Nyabirama pit. Tonnes processed in the fourth quarter of 2.4 million tonnes were in line with the corresponding quarter of 204. The average grade processed for the quarter was 3.0 grams per tonne which was % higher than the prior year period. The increase in grade was predominantly due to the contribution of higher grade underground ore at North Mara and the impact of the higher grade tailings reprocessed at Bulyanhulu, compared to the prior period. Copper production for the quarter was 4.5 million pounds, 45% higher than the prior year period, mainly driven by higher copper grades at Bulyanhulu and Buzwagi when compared to Q The cash balance as at 205 amounted to approximately US$233 million, increasing by US$7 million during the quarter. The outstanding balance of the debt facility amounted to approximately US$28 million at year end. Outlook As we move into 206 our focus continues to be the delivery of free cash flow. We successfully returned to free cash generation in Q4, despite the costs associated with the 30% reduction in workforce and expect to generate free cash for the full year 206. We have incorporated a lower gold price of US$,00 per ounce into our reserve and planning assumptions and to strengthen our ability to generate free cash flow within the weaker gold price environment, we have taken further action to reduce costs across the business, including: US$25 million annual saving from the restructuring of the workforce announced in late 205 US$0 million further reduction in capital expenditure (based on the bottom of 206 guidance range) US$0 million reduction in corporate administration costs spend reduced by 50% since 202 US$0 million of annualised savings through renegotiation of contracts across supply chain The Board of Directors and the Executive Leadership Team have volunteered to take a 0% reduction in salary Whilst the group delivered strong performance in the fourth quarter, full year delivery in 205 was below expectations despite a very successful year at North Mara. As a result, we have incorporated the learnings from 3

4 this as well as our primary focus on free cash flow into our mine plans for 206 and beyond, and at the mid-point of the guidance range expect to see a 5% increase in group production over 205 with a reduction in AISC of approximately 5%. As a result of the grade profile at Buzwagi in Q, we expect a ratio of production to be 45:55 in terms of the first half versus the second half of the year. Production (koz) Cash Cost (US$/oz) Capex (US$m) AISC (US$/oz) 205A 206E 205A* 206E 205A* 206E 205A* 206E * Preliminary numbers , At Bulyanhulu we have fundamentally re-engineered the operation over the past two years and delivered a 40% production increase in that time. We have made significant progress in the mechanisation of the mine, increasing workforce productivities and improving underground operating metrics. Our focus is on free cash flow and accordingly we have reviewed reserves based on the lower gold price assumption and a more detailed mine design approach. Following this review, and our experience in 205, it was determined that within the Upper East Zone, which was expected to ramp up significantly in 206, further definition drilling on the Reef 2 series is required in order to better define the geological complexity and as a result have deferred the planned increase in mining rates. As a result, we expect production in 206 to be broadly in line with 205 and with our focus on cost reduction measures we expect AISC to fall by more than 5% year on year. We are still confident that Bulyanhulu will produce 350,000 ounce per annum over the medium term and are assessing the potential above this production rate through an ongoing three year drilling programme, primarily on the Reef 2 series. North Mara is expected to continue to perform strongly as the Gokona Underground is fully ramped up and a second access portal is developed to provide additional flexibility. As a result of the increased proportion of mill feed being sourced from the underground we expect to see a 5% increase in production, with a similar reduction in AISC in 206 over 205. At Buzwagi, we expect the mine to generate solid cash flows, with production expected to be 0% higher than 205 with AISC down by approximately 5%. As a result of delays in waste movement in 205, there will be a focus on waste stripping in Q 206 to reduce the backlog. This will result in the deferral of some of the high grade material previously planned to be mined in the year into Q 207 and will mean that approximately 35% of the mill feed in the first quarter will come from lower grade stockpiles. Our annual carrying value review of our assets will be based on the new reserves and resource assumptions and the results of the ongoing review will be released in our preliminary results in February, together with an updated reserve and resource statement. We have continued to improve our capital discipline and expect a further 5% reduction in capital expenditure in 206 driven by a further reduction in sustaining capital to approximately US$60 million as we focus on production critical initiatives at each of the mines. Our investment in waste stripping and underground development is expected to be in line with 205 as we continue to build flexibility in the underground operations at Bulyanhulu and North Mara. As previously flagged we plan to maintain our exploration spend at approximately US$20 million, as we progress projects in Kenya, Burkina Faso and Mali and look to further add prospective land packages to our portfolio. Corporate administration costs are expected to fall by over 25% to US$25 million as we focus on a reduction in headcount, travel and other central expenses. 4

5 Mine Site Review Bulyanhulu Key Statistics Three months ended Year ended (Unaudited) Key operational information: Ounces produced oz 78,223 66, , ,786 Ounces sold oz 79,233 63,66 265,34 25,740 Copper production Klbs,774,370 6,308 5,289 Copper sold Klbs,559,425 5,424 4,925 Cash cost per ounce sold US$/oz AISC per ounce sold US$/oz 999,225,253,266 Capital expenditure 2 US$ 000 2,982 30,48 0,292 3,549 Run-of-mine processing: Underground ore tonnes hoisted Kt Ore milled Kt Head grade g/t Mill recovery % 88.8% 83.8% 88.5% 88.0% Ounces produced oz 66,874 58, , ,38 Reprocessed tailings: Ore milled Kt , Head grade g/t Mill recovery % 56.6% 59.4% 56.6% 56.9% Ounces produced oz,349 7,035 33,508 2,405 These are non-ifrs measures. Refer to page 8 for definitions 2 Excludes non-cash capital adjustments (reclamation asset adjustments), includes finance lease purchases and land purchases treated as long term prepayments Gold production at Bulyanhulu for the quarter was 78,223 ounces, including,349 ounces from reprocessed tailings, 8% higher than the prior year period. This was driven by an increase in production attributable to both run-of-mine processing (7,876 ounces) and the reprocessing of tailings (4,34 ounces). The increase in production attributable to run-of-mine processing is due to a 9% increase in throughput driven by an improvement in underground ore tonnes hoisted and a 6% increase in recovery rate as a result of improvements in elution circuit performance following the remediation of previous stability and performance issues, which was partly offset by a 3% reduction in head grade. The increase in production attributable to reprocessed tailings was driven by a 60% higher head grade recovered from the reprocessing of tailings. In late Q4 205, the old CIL plant was re-commissioned in order to separate the reprocessed tailings stream from the run-of-mine stream to better manage long term recoveries and processing costs. The two streams are currently running in parallel and once we have a sustained period of operation from both plants we will be better able to quantify the future benefit. For the full year, gold production of 273,552 ounces was 7% higher than in 204, mainly driven by an 8% increase in throughput, and a % increase in recovery. This was in combination with an increase of 2,03 ounces of production from reprocessed tailings as a result of increased throughput combined with an 8% higher grade recovered. Copper production for the quarter of,774 pounds was 29% higher than 204 due to an increased copper grade combined with higher throughput. On a full year basis, total copper production of 6,308 was 9% higher than 204, driven by a higher throughput. 5

6 Buzwagi Key statistics Three months ended Year ended (Unaudited) Tonnes mined Kt 5,573 6,878 24,989 24,50 Ore tonnes mined Kt,432,248 5,658 4,692 Ore milled Kt,060,052 4,085 4,086 Head grade g/t Mill recovery % 94.8% 94.2% 94.% 92.4% Ounces produced oz 45,96 44,398 7,72 20,063 Ounces sold oz 4,879 55,36 66,957 23,399 Copper production Klbs 2,72,738 8,672 8,780 Copper sold Klbs 2,60 2,390 7,894 8,523 Cash cost per ounce sold US$/oz,0 88, AISC per ounce sold US$/oz, ,87,055 Capital expenditure 2 US$ 000 2,74 6,984 2,335 44,74 These are non-ifrs measures. Refer to page 8 for definitions 2 Excludes non-cash capital adjustments (reclamation asset adjustments), includes finance lease purchases and land purchases treated as long term prepayments Gold production for the quarter at Buzwagi of 45,96 ounces was 2% higher than in Q4 204, driven by marginal improvements in throughput and recovery rates. Operations continued to focus on the movement of waste and lower grade splay materials in order to open up access to higher grade areas in the main ore zone in 206. Gold sold for the quarter amounted to 4,879 ounces, 24% below that of Q4 204 as a result of the sale of concentrate inventory on hand at the beginning of the quarter in 204, and 7% lower than production due to the timing of the production of concentrate, which will be sold in Q 206. Gold production for the full year of 7,72 ounces was 9% lower than in 204 due to an 8% decrease in grade as operations were predominately focused in lower grade splay areas in the open pit. This was partly offset by a 2% improvement in recoveries driven by improvements in elution circuit performance. Copper production of 2.7 million pounds for the quarter was 57% higher than in Q4 204 driven by the higher copper grades. 6

7 North Mara Key statistics Three months ended 3 December Year ended 3 December (Unaudited) Key operational information: Ounces produced oz 77,304 70, ,88 273,803 Ounces sold oz 77,505 75, , ,540 Cash cost per ounce sold US$/oz AISC per ounce sold US$/oz Capital expenditure 2 US$( 000) 7,756 8,059 69,06 8,065 Open pit: Tonnes mined Kt 4,33 3,653 5,0 6,265 Ore tonnes mined Kt ,36 2,569 Mine grade g/t Underground: Ore tonnes trammed Kt Mine grade g/t Processing information: Ore milled Kt ,833 2,804 Head grade g/t Mill recovery % 89.5% 86.9% 88.2% 87.2% These are non-ifrs measures. Refer to page 8 for definitions 2 Excludes non-cash capital adjustments (reclamation asset adjustments), includes finance lease purchases and land purchases treated as long term prepayments Gold production for the quarter at North Mara of 77,304 ounces was 9% higher than in Q4 205, as head grade increased by 9% compared to Q4 204 due to the increased proportion of higher grade ore delivered from the Gokona Underground, which more than offset the lower open pit grade from Nyabirama. The Gokona Underground ramped up to full production rates during the quarter with mined grade increasing to 8.7 grams per tonne due to the increased proportion of stoping ore in relation to total underground ore production. Recoveries increased by 3% compared to the same period in 204. Gold ounces sold for the quarter of 77,505 ounces were in line with production. Gold production for the full year of 287,88 ounces was 5% higher than in 204. This was as a result of a % improvement in recoveries and marginally higher throughput and head grade. Gold ounces sold for the full year of 288,905 ounces were 5% higher than 204 and broadly in line with production. 7

8 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. 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 gold revenue: - Unrealised mark-to-market gains and losses on provisional pricing from copper and gold sales contracts; and - Export duties. Cash cost per ounce sold is a non-ifrs financial measure. Cash costs include all costs absorbed into inventory, as well as royalties, and production taxes, and exclude capitalised production stripping costs, inventory purchase accounting adjustments, unrealised gains/losses from non-hedge currency and commodity contracts, depreciation and amortisation and corporate social responsibility charges. Cash cost is calculated net of co-product revenue. Refer to page 5 for a reconciliation to cost of sales. 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 cost per ounce sold is calculated by dividing the aggregate of these costs by gold ounces sold. Cash costs and cash cost per ounce sold are calculated on a consistent basis for the periods presented. 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 203. It is calculated by taking cash cost per ounce sold and adding corporate administration costs, reclamation and remediation costs for operating mines, corporate social responsibility expenses, mine exploration and study costs, capitalised stripping and underground development costs and sustaining capital expenditure. This is then divided by the total ounces sold. 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, depreciation and selling costs. Mining statistical information The following describes certain line items used in the Acacia Group s discussion of key performance indicators: - Open pit material mined measures in tonnes the total amount of open pit ore and waste mined. - Underground ore tonnes hoisted measures in tonnes the total amount of underground ore mined and hoisted. - 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. 8