African Barrick Gold plc ( ABG ) reports first quarter 2014 results

Transcription

1 24 April 2014 Results for the three months ended 31 March 2014 (Unaudited) Based on IFRS and expressed in US Dollars (US$) African Barrick Gold plc ( ABG ) reports first quarter 2014 results We have delivered another strong set of results, with production of 168,375 ounces and all-in sustaining costs of US$1,131 per ounce, our sixth successive quarterly reduction in AISC, said Brad Gordon, Chief Executive Officer of African Barrick Gold. As a result of our continued cost discipline we generated positive cash from the operations during the quarter and continue to expect to be cash flow positive for the full year. We also continue to make progress on our expansion projects with the commencement of commissioning of the Bulyanhulu CIL Expansion, approval for an underground portal at North Mara and today s announcement on the approval of the Upper East Zone at Bulyanhulu which together will further drive the business forward. We remain on track to achieve our guidance of 650, ,000 ounces of gold production at AISC per ounce of between US$1,100 and US$1,175. First Quarter Operational Highlights Gold production of 168,375 ounces 18% higher than Q Gold sales were 5% below production at 159,384 ounces, but 10% higher than Q Cash costs 1,2 of US$756 per ounce sold, 15% lower than Q All-in sustaining costs 1,2 of US$1,131 per ounce sold, 3% lower than Q and 28% lower than Q Average realised gold price of US$1,303 per ounce was 19% below Q Bulyanhulu CIL Expansion project moved into the commissioning phase which will continue through Q Post quarter end the Board approved the next step in optimising Bulyanhulu with the acceleration of the Upper East Zone First Quarter Financial Highlights Revenue of US$216 million and EBITDA 1,3 of US$65 million were 12% and 21% respectively below Q due to the lower average realised gold price in the quarter Net earnings 2,3 of US$22.4 million (US5.5 cents per share), up 8% on Q Total capital expenditure 4 of US$55.7 million was reduced by 47% from Q Generated cash flow from operations of US$13.3 million after sustaining capital Cash position of US$254 million as at 31 March 2014 Three months ended Year ended 31 March 31 December (Unaudited) % change Gold Production (ounces) 168, ,759 18% 637,002 Gold Sold (ounces) 159, ,277 10% 643,597 Cash cost (US$/ounce) % 812 AISC (US$/ounce) 1 1,131 1,577-28% 1,346 Average realised gold price (US$/ounce) 1 1,303 1,610-19% 1,377 (in US$'000) Revenue 216, ,460-12% 929,004 EBITDA 1,3 64,731 81,943-21% 240,407 Net earnings/(loss) 3 22,410 20,716 8% (781,101) Basic earnings/(loss) per share (EPS) (cents) % (190.4) Cash generated from operating activities 50,726 57,326-12% 187,115 Capital expenditure 4 55, ,709-47% 385,069 1 Cash costs per ounce sold, all-in sustaining cost per ounce sold (AISC) and EBITDA are non-ifrs measures. Refer to page 11 for definitions comparative amounts have been restated to exclude Tulawaka 3 EBITDA and net earnings consist of earnings from both continuing and discontinued operations 4 Excludes non-cash reclamation asset adjustments and includes finance lease purchases 1 LSE: ABG

2 Operational Review Our continued delivery on the cost saving targets set out at the start of the Operational Review is highlighted by a further reduction of 3% in AISC over the first quarter of 2014 (28% reduction year on year) and improved cash flow generation from our sustaining operations quarter on quarter supported by a strong production profile. We remain committed and on track to deliver against the US$185 million cost saving target as previously set out and reflected in our AISC guidance. We are progressing the ongoing review in our core mining areas, and we believe that this will deliver further efficiencies and cost savings throughout 2014 and beyond. Divestment of Tulawaka In February, we announced the completion of the transfer of Tulawaka and certain exploration licences to STAMICO, the Tanzanian state mining company. As previously announced STAMICO took ownership and management of the rehabilitation fund established as part of the closure plan for the mine, in return for the assumption of all remaining past and future closure and rehabilitation liabilities for Tulawaka, and has indemnified the other parties to the agreement in relation to these liabilities. As a result ABG transferred the balance of the rehabilitation fund to STAMICO, less the transaction consideration and other closing adjustments, which equated to a cash payment of US$11.6 million. Included in the net cash payment is a consideration received from STAMICO of US$4.5 million for assets relating to the operation. After non operational costs incurred in January and February and other closing adjustments, this resulted in a realised gain of US$1.3 million included in other charges and a total cash outflow during the quarter of US$15.9 million. Safety On 25 March 2014, Emmanuel Mrutu, one of our underground employees sadly passed away as a result of injuries sustained following a fall-of-ground incident at Bulyanhulu. After ceasing operations for a 24 hour period, we have ongoing internal and external investigations into this tragic incident in order to mitigate any reoccurrence in future. Ensuring the safety of all our employees is paramount, and we have continuously improved our safety performance at all of our operations over the past few years. In this regard, we have commissioned a behavioural safety expert to further enhance our safety processes. Barrick Gold Corporation Shareholding On 11 March 2014 Barrick Gold Corporation ( Barrick ), ABG s majority shareholder, completed the sale of 41 million shares representing 10% of ABG s issued share capital through a placement with a number of institutional investors. This placement was consistent with Barrick s ongoing portfolio optimisation strategy and has significantly increased ABG s free float. After completion of the transaction, Barrick s holding in ABG is 63.9%. At the same time, our index weighting calculated by FTSE has increased to 37% from 27%. Bulyanhulu Upper East As announced today in a separate release, the Board has approved the next step in the optimisation of Bulyanhulu through the acceleration of mining from the Upper East Zone. The development of this area will require additional 2014 capital of approximately US$15 million, with initial production from the zone expected within 3 months. The area is expected to produce 1.7 million ounces of gold, averaging 60,000 ounces per annum over a life in excess of 25 years at all-in sustaining costs of below our target run rate for Bulyanhulu for year-end 2015 of US$900 per ounce. Gokona Underground As part of the feasibility study into the potential to mine Gokona Cut 3 via an underground operation, the Board approved the development of an exploration portal in the existing open pit. The portal will provide the opportunity to develop a better understanding of the ore body, initial access to ore and drilling access to the deeper extensions of the ore body. Final geotechnical work is underway to decide the location of the portal with construction expected to commence in Q The total cost of the portal is expected to be under US$10 million, and this cost is expected to be partially offset by revenue from ore produced as part of the feasibility test work. Indirect Tax Receivables We are continuing to make progress with respect to the build-up of VAT and saw net refunds of US$10 million during the quarter. The escrow account relating to VAT on imports continues to work well, and we continue discussions with respect to implementing a similar mechanism for VAT on domestic goods and services. As at 31 March 2014, the outstanding amount relating to the total indirect tax receivable stood at US$85 million. 2 LSE: ABG

3 Key statistics restated to reflect Tulawaka as a discontinued operation Year ended 31 Three months ended 31 March December (Unaudited) Tonnes mined (thousands of tonnes) 9,537 13,977 54,076 Ore tonnes mined (thousands of tonnes) 1,793 1,651 7,225 Ore tonnes processed (thousands of tonnes) 1,845 1,911 7,914 Process recovery rate (percent) 89.1% 89.1% 88.7% Head grade (grams per tonne) Attributable gold production (ounces) 168, , ,002 Attributable gold sold (ounces) 159, , ,597 Copper production (thousands of pounds) 2,976 2,462 11,970 Copper sold (thousands of pounds) 2,517 3,357 11,570 Per ounce data Average spot gold price 2 1,293 1,631 1,411 Average realised gold price 1 1,303 1,610 1,377 Total cash cost All-in sustaining cost 1 1,131 1,577 1,346 Average realised copper price (US$/lb) Cash on hand (US$ 000) 254, , ,409 Long term borrowings (US$ 000) 142,000 50, ,000 Financial results restated to reflect Tulawaka as a discontinued operation Year ended 31 Three months ended 31 March December (Unaudited) (US$'000) Revenue 216, , ,004 Cost of sales (159,141) (183,385) (713,806) Gross profit 57,145 62, ,198 Corporate administration (6,356) (8,414) (33,813) Share based payment expenses (3,324) 3,436 1,656 Exploration and evaluation costs (4,970) (3,589) (16,927) Corporate social responsibility expenses (2,496) (3,151) (12,237) Impairment charges - - (1,044,310) Other charges (6,623) (2,938) (30,424) Profit/(loss) before net finance cost 33,376 47,419 (920,857) Finance income ,670 Finance expense (2,402) (2,519) (9,552) Profit/(loss) before taxation 31,324 45,488 (928,739) Tax (expense)/credit (10,669) (14,259) 187,959 Net profit/(loss) from continuing operations 20,655 31,229 (740,780) Discontinued operations: Net profit/ (loss) from discontinued operations 1,288 (15,019) (57,653) Net profit/(loss) for the period 21,943 16,210 (798,433) Attributed to: Owners of the parent (net earnings/(loss)) 22,410 20,716 (781,101) - Continuing operations 20,655 31,229 (740,780) - Discontinued operations 1,755 (10,513) (40,321) Non-controlling interests (467) (4,506) (17,332) - Discontinued operations (467) (4,506) (17,332) 3 LSE: ABG

4 Reconciliation of Group Financial Performance split by Continuing and Discontinued Operations Three months ended 31 March 2014 Three months ended 31 March (Unaudited) (US$ 000) Continuing Operations Discontinued Operations Total Continuing Operations Discontinued Operations Total Revenue 216, , ,460 9, ,649 Cost of sales (159,141) - (159,141) (183,385) (21,290) (204,675) Gross profit 57,146-57,146 62,075 (12,101) 49,974 Corporate administration (6,357) - (6,357) (8,414) (989) (9,403) Share based payment expenses (3,324) (3,324) 3, ,516 Exploration and evaluation costs (4,970) - (4,970) (3,589) (809) (4,398) Corporate social responsibility expenses (2,496) (44) (2,540) (3,151) (295) (3,446) Impairment charges Other (charges)/ income (6,623) 1,331 (5,292) (2,938) (875) (3,813) Profit/(loss) before net finance cost 33,376 1,287 34,663 47,419 (14,989) 32,430 Finance income Finance expense (2,402) (11) (2,413) (2,519) (38) (2,557) Profit/(loss) before taxation 31,324 1,288 32,612 45,488 (15,019) 30,469 Tax (expense)/credit (10,669) - (10,669) (14,259) - (14,259) Net profit/(loss) for the period 20,655 1,288 21,943 31,229 (15,019) 16,210 1 Average realised gold price, total cash cost per ounce, all-in sustaining cost per ounce, EBITDA, adjusted EBITDA, adjusted net earnings, adjusted net earnings per share and operating cash flow per share are non-ifrs financial performance measures with no standard meaning under IFRS. Refer to Non IFRS measures on page 11 for definitions. 2 Reflect the London PM fix price comparative information has been restated to exclude the results of Tulawaka. 4 LSE: ABG

5 For further information, please visit our website: or contact: African Barrick Gold 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 ABG ABG is Tanzania s largest gold producer and one of the largest gold producers in Africa. We have three producing mines, all located in Northwest Tanzania, and several exploration projects at various stages of development in Tanzania and Kenya. We have a high quality asset base, solid growth opportunities and a clear strategy of optimising, expanding and growing our business. Maintaining our licence to operate through acting responsibly in relation to our people, the environment and the communities in which we operate is central to achieving our objectives. ABG is a UK public company with its headquarters in London. We are listed on the Main Market of the London Stock Exchange under the symbol ABG and have a secondary listing on the Dar es Salaam Stock Exchange. Historically, and prior to our initial public offering (IPO), our operations comprised the Tanzanian gold mining business of Barrick Gold Corporation, our majority shareholder. ABG 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 24 April 2014 at 12:30pm London time. The access details for the conference call are as follows: Participant dial in: +44 (0) / Password: ABG A recording of the conference call will be made available at 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 ABG, 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 ABG 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 ABG 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), ABG s ability to successfully integrate acquisitions, 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 process its mineral reserves successfully and in a timely manner, ABG 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 ABG s business strategy including, ABG s further implementation of the Operational Review, 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 ABG s management believes that the expectations reflected in such forward-looking statements are reasonable, ABG 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. 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 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 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. 5 LSE: ABG

6 Operating and financial review for the three months ended 31 March 2014 During the first quarter of 2014 we continued to build on the strong platform set towards the end of 2013, with all three operating sites delivering positive results. This resulted in production of 168,375 ounces, an 18% increase on the same period in 2013, with production increasing across all sites. Gold sales amounted to 159,384 ounces, 5% lower than production due to strong production late in the quarter at Bulyanhulu and Buzwagi which meant that the concentrate shipments did not leave site until after the end of the quarter. Bulyanhulu continues to show operational improvements which are resulting in increased access to higher grade stopes with head grade improving by 12% from Q and 8% from Q This resulted in production of 55,179 ounces, 4% higher than Q and 45% higher than Q Gold ounces sold amounted to 49,121 ounces for the quarter, 6,058 ounces lower than production due to strong production late in the quarter impacting on the timing of sales. At Buzwagi, as a result of the revised mine plan, tonnes mined were 37% lower than Q1 2013, while ore tonnes mined were 46% higher. As part of this plan, higher grade areas have been opened up, resulting in a 23% increase in head grade compared to Q This more than offset the 11% decrease in throughput and slightly lower recovery rate of 88.2%. As a result, production for the quarter amounted to 44,557 ounces, 11% higher than the same period last year. At North Mara, mining continued from the higher grade zones in the Gokona pit resulting in a head grade of 3.7 grams per tonne, which more than offset the 28% decrease in ore tonnes mined due to mine sequencing and the revised mine plan. Process plant improvements resulted in a slight increase in throughput and an increased recovery rate of 87.8% (87.3% in Q1 2013). As a result, production for the quarter amounted to 68,639 ounces, an increase of 6% on Q Total tonnes mined amounted to 9.5 million tonnes, a decrease of 32% on Q1 2013, mainly driven by a decrease in waste mining at Buzwagi (45%) and North Mara (23%) due to the change in mine plan. Ore tonnes mined of 1.8 million tonnes were 9% higher than in Q as a result of the increase in ore tonnes mined at Buzwagi, offset by lower ore tonnes mined at North Mara. Ore tonnes processed amounted to 1.8 million tonnes, a decrease of 3% from Q This was mainly driven by lower throughput at Buzwagi due to plant downtime as a result of restricted access to higher grade ore and maintenance, partially offset by improved throughput at both Bulyanhulu and North Mara. Total head grade for the quarter of 3.2 g/t was 23% higher than in Q This was mainly driven by the mining of higher grade stopes at Bulyanhulu and higher grade ore mined at Buzwagi. Our total cash costs of US$756 per ounce sold were 15% lower than Q The decrease was primarily due to decreased labour costs as a result of the Operational Review (US$67/oz), lower energy costs due to a lower reliance on self generated power (US$21/oz) and lower contracted services due to cost saving initiatives (US$56/oz). This was partially offset by lower capitalised stripping and development costs driven by lower waste mining mainly at Buzwagi (US$51/oz). All-in sustaining cost per ounce sold ( AISC ) of US$1,131 was 28% lower than Q driven by lower cash costs and the impact of the Operational Review on corporate administration costs, capitalised development costs and sustaining capital expenditures combined with a higher production base. This was partially offset by increased share based payment expenses due to the improved share price performance. Copper production for the quarter of 3.0 million pounds was 21% higher than in Q1 2013, mainly due to improved grades and throughput at Bulyanhulu. Revenue of US$216.3 million was 12% lower than Q as a result of an increase of 10% in ounces sold being more than offset by a US$307 per ounce decrease in the average realised price reflecting the decrease in gold prices. The average realised price for Q amounted to US$1,303 per ounce sold compared to US$1,610 in Q1 2013, but was marginally higher than the average market price for the quarter. EBITDA of US$64.7 million was 21% lower than Q mainly as a result of a 12% decrease in revenue which was partially offset by lower direct mining costs and lower corporate administration charges. This was in part offset by increased share based payment expenses (reflecting improved share price performance), increased exploration expenditure and increased other charges, mainly relating to restructuring, Tulawaka non-operational costs and the impact of a weakening exchange rate on the revaluation of Tanzanian Shilling denominated receivables. Capital expenditure for the quarter amounted to US$55.7 million compared to US$100.8 million in Q Key capital expenditures included the Bulyanhulu CIL Expansion project (US$14.9 million), capitalised stripping at Buzwagi and North Mara (US$21.9 million), capitalised underground development at Bulyanhulu (US$11.3 million) and group sustaining capital investments of US$7.5 million. In addition, land purchases of US$4.2 million were incurred at North Mara during the quarter compared to US$4.1 million in Q The cash balance as at 31 March 2014 amounted to US$254 million, with positive cash flow from sustaining operations of US$13.3 million offset by the total cash outflow related to Tulawaka of US$15.9 million, US$14.9 million of expansionary capital as explained above, and a US$6.8 million reduction of amounts previously accrued toward the CIL Expansion. 6 LSE: ABG

7 Bulyanhulu Key statistics Three months ended 31 March Year ended 31 December (Unaudited) Underground ore tonnes hoisted Kt Ore milled Kt Head grade g/t Mill recovery % 91.7% 91.3% 90.9% Ounces produced oz 55,179 38, ,286 Ounces sold oz 49,121 33, ,304 Cash cost per ounce sold US$/oz 811 1, AISC per ounce sold US$/oz 1,145 1,921 1,344 Copper production Klbs 1, ,855 Copper sold Klbs 1, ,508 Breakdown of Capital Expenditure - Sustaining capital US$('000) 2,148 7,593 25,193 - Capitalised development US$('000) 11,256 12,280 45,428 - Expansionary capital US$('000) 14,859 22, ,912 Capital expenditure US$('000) 28,263 42, ,533 - Non-cash reclamation asset adjustments US$('000) 5,665 (2,365) (10,044) Total capital expenditure US$('000) 33,928 40, ,489 Operating performance Bulyanhulu continues to show operational improvements which are resulting in increased access to higher grade stopes with head grade of 8.5g/t improving by 12% from Q and 8% from Q This resulted in production of 55,179 ounces, 4% higher than Q and 45% higher than Q Gold ounces sold amounted to 49,121 ounces for the quarter, 6,058 ounces lower than production due to strong production late in the quarter impacting on the timing of sales. Ore tonnes mined and throughput remain at similar levels to Q4 2013, but were 23% and 29% higher respectively than in Q1 2013, which was impacted by downtime as a result of the failure of the production winder transformer and workforce shortages. Improvements made in the process plant together with the improved grade resulted in an improved recovery rate of 91.7%. Copper production for the quarter of 1.3 million pounds was 51% higher than that of the same period in 2013, primarily due to an improved copper grade and higher throughput. Cash costs were US$811 per ounce sold compared to US$1,192 in the prior year period mainly driven by the higher production base, lower maintenance costs due to improved condition monitoring controls and lower labour costs as a result of the Operational Review. This was in part offset by increased energy and fuel costs given the temporary requirement for self generation of power during January due to local damage to Tanesco transmission lines and an increase in mining activity and lower capitalised development costs. AISC per ounce sold was 41% lower than the prior year period at US$1,145 per ounce as a result of the lower cash cost base and lower capitalised development costs and sustaining capital. On the 25 th March, Emmanuel Mrutu, one of our underground employees sadly passed away as a result of injuries sustained following a fall of ground incident. Operations were ceased for a 24 hour period and investigations into the incident are underway. The Board has approved the next step in the optimisation of Bulyanhulu through the acceleration of mining from the Upper East Zone. The development of this area will require additional 2014 capital of approximately US$15 million, with initial production from the zone expected within 3 months. The area is expected to produce 1.7 million ounces of gold, averaging 60,000 ounces per annum over a life in excess of 25 years at all-in sustaining costs of below our target run rate for Bulyanhulu for year-end 2015 of US$900 per ounce. The CIL Expansion, which will add over 40,000 ounces per annum once fully ramped up, has now moved into the commissioning phase. The project remains on budget with first gold expected in late Q These two projects, together with the planned step up in mined grade represent important steps in the optimisation of Bulyanhulu. Capital expenditure for the quarter of US$28.3 million was US$14.4 million lower than the prior year period. Key capital expenditure included the CIL Expansion project (US$14.9 million) and capitalised development costs of US$11.3 million. 7 LSE: ABG

8 Buzwagi Key statistics Three months ended 31 March Year ended 31 December (Unaudited) Tonnes mined Kt 5,543 8,830 32,177 Ore tonnes mined Kt 1, ,753 Ore milled Kt 970 1,093 4,400 Head grade g/t Mill recovery % 88.2% 89.3% 88.2% Ounces produced oz 44,557 40, ,984 Ounces sold oz 42,963 51, ,348 Cash cost per ounce sold US$/oz AISC per ounce sold US$/oz 1,274 1,654 1,506 Copper production Klbs 1,681 1,606 7,115 Copper sold Klbs 1,323 2,489 7,062 Breakdown of Capital Expenditure - Sustaining capital US$('000) 1,861 16,145 31,589 - Capitalised development US$('000) 9,632 23,912 60,136 - Expansionary capital US$('000) Capital expenditure US$('000) 11,493 40,057 91,725 - Non-cash reclamation asset adjustments US$('000) 665 (1,039) (9,230) Total capital expenditure US$('000) 12,158 39,018 82,495 Operating performance As previously announced, we have re-engineered the mine plan at Buzwagi to significantly reduce the AISC of the mine and to enable positive free cash generation. We began to implement the new plan during Q and are continuing to see a positive impact on the cost base. Total tonnes mined of 5.5 million tonnes were 37% lower than Q1 2013, while ore tonnes mined were 46% higher as a result of the changes to the mine plan. Isolated instability of the Western wall of the pit resulted in a change in mine sequencing which, in combination with mining constraints following flooding after heavy rains in March 2014, negatively impacted on total tonnes mined and the availability of higher grade ore but have increased waste movement compared to the mine plan. These operational constraints have now been addressed and we expect mining tonnes and the grade mined to return to expected levels during Q During Q the reduced ore tonnes mined led to reduced mill utilisation, with a number of maintenance shutdowns rescheduled in the quarter to minimise additional downtime, resulting in an 11% decrease in tonnes milled from Q Daily throughput rates remained at nameplate capacity. As a result of changes in the mine plan focusing mining on higher grade areas, the head grade of 1.6 g/t was 23% higher than in Q1 2013, but lower than planned levels for the quarter as a result of the constraints discussed above. As a result of the above factors, production for the quarter amounted to 44,557 ounces, an 11% increase from Q Gold ounces sold during the quarter trailed production by 4% due to the timing of March 2014 production being weighted towards the end of the month. Copper production for the quarter of 1.7 million pounds was 5% above that of the same period in This was primarily due to the increased copper recoveries that were slightly offset by lower throughput and copper grade. Cash costs for the quarter were US$927 per ounce sold compared to US$802 in Cash costs have been positively affected by the impact of the revised mine plan on activity based costs, lower labour costs mainly due to a reduction of international employees, and lower reliance on self generated power. However, this was more than offset by lower gold sales, capitalised development costs driven by the lower waste mining activity and lower co-product revenue as a result of lower copper prices. AISC per ounce sold of US$1,274 per ounce decreased by 23% from Q and was also 2% below Q This was due to lower sustaining capital and capitalised stripping costs, partially offset by higher cash costs. Capital expenditure for the quarter of US$11.5 million was 71% lower than the prior year period, driven by lower sustaining capital and capitalised stripping costs as a result of the new mine plan. 8 LSE: ABG

9 North Mara Key statistics Three months ended 31 March Year ended 31 December (Unaudited) Tonnes mined Kt 3,783 4,975 21,027 Ore tonnes mined Kt ,601 Ore milled Kt ,643 Head grade g/t Mill recovery % 87.8% 87.3% 86.8% Ounces produced oz 68,639 64, ,732 Ounces sold oz 67,300 59, ,945 Cash cost per ounce sold US$/oz AISC per ounce sold US$/oz 980 1,369 1,227 Breakdown of Capital Expenditure - Sustaining capital US$('000) 3,531 14,779 38,386 - Capitalised development US$('000) 12,267 6,646 65,594 - Expansionary capital US$('000) Capital expenditure US$('000) 15,798 21, ,929 - Non-cash reclamation asset adjustments US$('000) 3,976 (1,508) (11,271) Total capital expenditure US$('000) 19,774 20,045 93,658 Operating performance North Mara delivered another strong operating performance this quarter, and delivered gold production of 68,639 ounces, an increase of 6% on Q and 14% on Q Gold ounces sold amounted to 67,300 ounces for the quarter, slightly lower than production. Ore tonnes mined continued to be predominantly from the high grade zones of the Gokona pit, with head grade of 3.7 g/t slightly higher than the prior year period, but 9% higher than Q We are currently removing waste in the Nyabirama pit in order to increase our access to ore, and expect mining from this pit to increase from the middle of Q which will lead to a decrease in head grade. Throughput and recovery was broadly in line with the prior year period. Total tonnes mined for the quarter amounted to 3.8 million tonnes, 24% lower than the same quarter in 2013 as a result of changes made to the mine plan in Q3 2013, while ore tonnes mined of 560 thousand tonnes were 28% lower than Cash costs were US$607 per ounce sold compared to US$804 in the prior year period. The decrease in cash cost per ounce was driven by the increased production base, lower labour costs mainly as a result of a reduction in international employees as part of the Operational Review, lower contracted services and consumables as a result of the lower mining activity and an increased in capitalised stripping. AISC per ounce of US$980 was 28% lower than the prior year period as a result of the lower cash costs as explained above, lower sustaining capital expenditure, lower corporate administration and social responsibility expenditure, slightly offset by an increase in capitalised stripping costs. In addition, AISC includes US$4.2 million of land payments made during the quarter. Capital expenditure for the quarter of US$15.8 million was 27% lower than the prior year. Key capital expenditure included capitalised stripping (US$12.3 million) and investments in mine equipment for component change-outs, tailings and infrastructure (US$3.5 million). As part of the feasibility study into the potential to mine Gokona Cut 3 via an underground operation, the Board approved the development of an exploration portal in the existing open pit. The portal will provide the opportunity to develop a better understanding of the ore body, initial access to ore and drilling access to the deeper extensions of the ore body. Final geotechnical work is underway to decide the location of the portal with construction expected to commence in Q The total cost of the portal is expected to be under US$10 million, and this cost is expected to be partially offset by revenue from ore produced as part of the feasibility test work. 9 LSE: ABG

10 Exploration and Development Review Bulyanhulu Deeps West Surface Drilling In late 2013, we commenced drilling of three deep diamond core holes west of the Bulyanhulu mine, targeting the extension of Reef 1 and Reef 2 vein series west of the currently delineated resources. The holes are designed to predominantly test the extensions of the Reef 1 structure from 400 metres to 1,200 metres west of the current Bulyanhulu resource where historic drilling has shown indications of further gold mineralisation. The drilling is targeting a potential new economic zone and plunge extensions of the Main Zone of Reef 1 at depths of between 1km and 2.5km vertical. Additionally, holes will also intersect the Reef 2 vein series, and provide an indication of whether the Reef 2 system is mineralised up to 2km west of current underground resources. During Q1 2014, a total of 3,369 metres of diamond core was drilled from the surface holes. Two rigs are involved in this surface drilling programme, which will continue well into The Reef 1 and Reef 2 system was intersected in several holes during Q with encouraging results including significant intersections of: BGMDD0055W2: 16.2g/t Au from 944m Reef 2 BGMDD0055W3: 7.90g/t Au from 950m Reef 2 BGMDD0055W3: 7.00g/t Au from 1,059m Reef 1 BGMDD0054W3: 11.5g/t Au from 1,367m - Reef 2 The results from these holes are potentially significant in demonstrating that gold mineralisation continues west of the mine which would open the potential for a large expansion of the footprint of Bulyanhulu on both Reef 1 and Reef 2. The drilling programme will continue through 2014 and will comprise approximately 10,000 metres of further diamond core drilling from the three active and planned drill sites. This programme will form an important part of our assessment of how to most effectively develop the mine over the long term. Bulyanhulu East Deeps Underground Drilling - Reef 2 The East Deeps drilling programme is targeting down dip mineralisation of the Bulyanhulu Reef 2 system which is outside the current resource model. The programme is being drilled from several underground drill platforms and is aimed at adding high grade gold resources on the East Zone. Drilling continued in Q with a total of 2,464 metres of diamond core completed from two holes, with assay results returning the following significant intersections: UX : 13.6g/t Au from 1,042m Incl. 25.3g/t Au from 1,043m UX : 4.08g/t Au from 1,129m Incl. 8.70g/t Au from 1,130m The Reef 2 significant intersections continue to prove continuity at depth of the mineralisation with high grade. This has the potential to add significantly to the mine resource and increase the life of mine. The final drill hole in the programme is underway and following completion of which the programme will be reviewed before more drilling is undertaken. West Kenya Joint Venture Projects Exploration activities in Kenya continue to focus on grassroots target generation with soil sampling, rock chip sampling and Aircore drilling continuing throughout the Kakamega and Lake Zone gold camps. Assay results from a further 327 reconnaissance Aircore drill holes testing existing gold-in-soil anomalies along the Liranda Corridor on the south side of the Kakamega Dome have been returned with some very positive results including: KDAC0312: 15.2 g/t Au from 41m and 1.71 g/t Au from 62m KDAC0361: 0.81 g/t Au from 9m, including 2.26 g/t Au KDAC0376: 2.57 g/t Au from 57m The Aircore results to date are very encouraging given the current line spacing of the Aircore traverses varies between 400 metres and 800 metres and the average depth of drilling to date is a relatively shallow metres. Infill traverses will be undertaken as part of phase two of the programme before targets will be ranked for testing by more advanced reverse circulation and diamond drilling. In addition to the Aircore programme we continue to undertake extensive soil sampling of the licence area with a further 3,323 samples collected in Q with over 50 gold-in-soil anomalies now delineated for follow-up work. In tandem with this we have commenced gradient IP and Resistivity across selected gold-in-soil anomalies. These surveys aim to target mineralisation associated with sulphides and or resistive lithologies, structures or alteration. Seven anomalies have been covered by IP surveys to date for approximately 88 line kilometres, with four targets showing distinct resistivity and/or chargeability zones coincident with the gold-in-soil anomalies and should be considered as priority targets for future drilling programmes. 10 LSE: ABG

11 Non IFRS Measures ABG 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 ABG 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. 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 cost per ounce sold are 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 It is calculated by taking cash costs 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. A reconciliation between cash cost per ounce sold and AISC is presented below: (Unaudited) (US$/oz sold) Bulyanhulu Three months ended 31 March 2014 Three months ended 31 March 2013 North Mara Buzwagi ABG Group ongoing operations Bulyanhulu North Mara Buzwagi ABG Group ongoing operations Cash cost per ounce sold , Corporate administration Share based expenditure (6) (4) (3) (24) Rehabilitation Mine exploration CSR expenses Capitalised development Sustaining capital Total 1, ,274 1,131 1,921 1,368 1,653 1,577 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. EBITDA is a non-ifrs financial measure. ABG calculates EBITDA as net profit or loss for the period excluding: - Income tax expense; - Finance expense; - Finance income; - Depreciation and amortisation; - Impairment charges of goodwill and other long-lived assets; and - Discontinued operations. 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. EBIT is a non-ifrs financial measure and reflects EBITDA adjusted for depreciation and amortisation and goodwill impairment charges. Cash margin is a non-ifrs financial measure. The cash cost margin is the average realised gold price per ounce less the cash cost per ounce sold. Operating cash flow per share is a non-ifrs financial measure and is calculated by dividing Net cash generated by operating activities by the weighted average number of Ordinary Shares in issue. 11 LSE: ABG

12 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 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. 12 LSE: ABG