AFRICAN BARRICK GOLD PLC
LSE: ABG
First Quarter Report 2010
27 April 2010
Based on IFRS and expressed in US Dollars
African Barrick Gold plc ("ABG') reports first quarter results
Highlights
* On 24 March 2010, ABG completed its initial public offering (the "IPO") of
approximately 25% of its issued ordinary share capital on the London Stock
Exchange at an offer price of 575 pence per share. On 15 April 2010, ABG
issued a further 5,756,232 ordinary shares pursuant to the partial exercise
of an over-allotment option granted in connection with the IPO. ABG
received total net proceeds of $48 million from the exercise.
* A 143% increase in first quarter EBITDA of $100 million compared to the
prior year period of $41 million. The Q1 net earnings increased 356% from
$12 million in 2009 to $53 million in 2010.
* A 40% increase in first quarter attributable gold production of 177,095
ounces compared to the prior year period of 126,860 ounces. 2010 Q1 ounces
sold of 184,724 ounces outpaced production and increased 43% over the prior
year period of 128,799 ounces sold.
* ABG confirms production and cash cost guidance of 800,000 to 850,000 ounces
at $450 to $500 cash cost per ounce respectively for 2010.
* A 4% decrease in first quarter attributable cash cost per sold ounce at
US$516 per ounce compared to the prior year period of $537 per ounce.
* As at 31 March 2010 ABG had cash and cash equivalents of $320 million and
generated $67 million from operations for Q1 2010.
* There has been further investment in development work on identified organic
expansion opportunities at or near current operating mines.
* The takeover offer for all of the ordinary shares of the Australian-listed
company Tusker Gold Limited ("Tusker") was declared free from all
conditions on 20 April 2010. The offer period ends on 27 April 2010.
Commenting on the results, Greg Hawkins, Chief Executive Officer, said:
"I am pleased to report our first quarter results. It has been an exciting time
for ABG. We have successfully completed a listing on the London Stock Exchange.
We are starting life as a LSE Main Market listed company with a strong balance
sheet, and we now have the operational flexibility to achieve our full
potential. We have four high quality operating assets located in Tanzania and
today's results confirm our optimism for the future."
Initial Public Offering
On 24 March 2010, ABG completed its IPO of approximately 25% of its issued
ordinary share capital on the London Stock Exchange at an offer price of 575
pence per share.
On 15 April 2010, ABG issued a further 5,756,232 ordinary shares pursuant to
the partial exercise of an over-allotment option granted in connection with the
IPO. ABG received total net proceeds of $48 million. The proceeds obtained from
the exercise of the over-allotment option will be used to assist ABG in the
funding of maintenance capital, internal growth projects and general corporate
purposes.
Operating update
Q1 2010 production of 177,095 ounces was 40% higher than the prior year period
and cash costs were $516 per ounce sold which was 4% lower than the prior year
period. First quarter ounces sold was 184,724 ounces which is 43% higher than
the prior year period which totalled 128,799 ounces. The increase in production
was primarily driven by the contribution from Buzwagi which started commercial
production in May 2009. The decrease in ABG's cash costs was a result of: (i)
higher production at Bulyanhulu and (ii) reduced energy and maintenance costs
combined with a lower production strip ratio.
ABG reported EBITDA of $100 million for the quarter compared to $41 million for
the prior year period. The Buzwagi production in Q1 2010 contributed
significantly to the additional EBITDA over Q1 2009 when the operation was
still in the project execution phase. Increased revenue was also driven by
increased realised gold prices which saw the average realised gold price for
the first quarter increasing to $1,110/per ounce compared to $886/per ounce for
the prior year period.
Bulyanhulu production was negatively impacted during Q1 2010 by a tragic rock
fall incident that resulted in three employee fatalities. A team of senior
investigators from Barrick Gold Corporation ("Barrick") was dispatched to
undertake a full and thorough investigation of the accident. ABG is committed
to the safety of each of its employees and will continue to make safety the top
priority at its mines. Barrick had not suffered any employee safety-related
fatalities since 2006 in Tanzania. ABG suspended mining activities on 16 March
2010 for the rescue and recovery mission and a period of mourning and mining
activities were resumed by 19 March 2010.
During the quarter, the Buzwagi mine continued to work through transition ore,
which has lower grades and reduced mill recoveries than the primary sulphide
ore. We expect to process an increasing amount of primary and sulphide ore
during Q2 2010.
Tulawaka saw a decline in production largely due to lower equipment
availability which reduced the material hoisted to surface and saw an increase
in the processing of lower grade stockpiles. North Mara operating performance
continued as planned with the waste stripping in the Gokona pit.
ABG incurred capital expenditure of $38 million during the quarter compared to
$48 million for the prior year. Of this, $18 million was related to expansion
projects relating to North Mara deferred stripping, Buzwagi mining fleet
expansion and Tulawaka underground development. The remaining portion was
incurred in sustaining the current operations including ongoing underground
development at Bulyanhulu.
Financial update
At quarter end ABG had cash and cash equivalents of $320 million. ABG's
production and reserves are 100% unhedged and it is ABG's intention to provide
shareholders maximum exposure to changes in the gold price. ABG will manage its
balance sheet conservatively, and together with strong cash flow generation at
current gold prices, has appropriate financial flexibility to invest in the
sustainability of current operations, fund organic growth projects, as well as
take advantage of external growth opportunities that may arise.
Exploration and Corporate Development Update
ABG plans to grow gold production to over 1.0 million ounces with lower cash
costs by 2014, and to double 2009 production in the next 10 years. To achieve
these targets, ABG expects to increase production through brown field expansion
at existing infrastructure, aggressively explore its large, prospective
Tanzanian exploration ground, and in time expand within Africa with
opportunistic exploration earn-ins and acquisitions.
ABG has approved a $20 million exploration budget for 2010 to optimize and
leverage the four established producing mines by increasing incremental
production and to expand its reserves and resources. In Q1 2010 ABG spent $1.8
million on exploration in the aforementioned projects.
Exploration drilling commenced on near mine targets at Tulawaka, although field
activities at most projects in Tanzania were restricted during the quarter due
to a lack of access as a result of high rainfall from the current wet season.
The majority of other exploration work for the quarter focused on preparations
for upcoming drill programs at Golden Ridge and Gokona-Nyabigena (North Mara)
where feasibility and underground scoping studies are underway, respectively.
At Tulawaka, reverse circulation drilling at the Mojamoja target, approximately
4km northwest of the Tulawaka plant has identified a new zone of gold
mineralisation. "Tulawaka style" quartz veining was encountered in several
drill holes, with visible gold observed in RC chips associated with higher
grade gold assays. Significant intercepts included better results of 12m @
11.5g/t Au from 89m (including 2m @ 57.1g/t Au), 5m @ 36.4g/t Au from 76m
(including 2m @77.5g/t Au), and 1m @ 67.3g/t Au from 48m. Additional step-out
and infill drilling will be required prior to resource estimation work.
In addition, the underground exploration drill program at Tulawaka East Zone
continued to identify extensions to the known high grade shoots in the AZM-124
Zone. Better results included, 4m @ 18.45g/t Au and 4.6m @ 34.5g/t Au
(down-hole intersected width represents approximate true width) between Level 9
and Level 10. These high-grade intersections indicate the potential to identify
extensions of the underground reserves and resources beyond currently defined
levels, and further extend the Tulawaka mine life beyond 2010.
On 20 April 2010, the takeover offer made by BUK Holdco Limited ("BUK"), a
wholly-owned subsidiary of ABG, for all of the ordinary shares of Tusker was
declared free from all conditions. The offer period ends on 27 April 2010. BUK
commenced the compulsory acquisition process to acquire the Tusker shares that
were not tendered into the takeover offer (the "Compulsory Acquisition") on or
around 21 April 2010. BUK expects to complete the Compulsory Acquisition by
early June 2010. The total consideration payable by BUK to shareholders to
acquire 100% of Tusker is approximately $75 million (based on an assumed
exchange rate of $ 1 to A$ 1.08).
Tusker holds a 49% interest in the Nyanzaga joint venture in Tanzania, with ABG
owning the remaining 51%. Upon completion of the Compulsory Acquisition, ABG's
interest in the Nyanzaga joint venture will be increased to 100%. The Nyanzaga
project covers more than 350 square kilometres in the Lake Victoria Goldfields
and is located approximately 35 kilometres northeast of the Bulyanhulu mine.
The consolidation of the Nyanzaga JV provides ABG with advanced-stage
exploration properties that can be advanced to development with ABG as the 100%
owner, and provides the opportunity to add significant production ounces to
ABG's future profile. The Company believes that the Tusker deposit has the
potential to become a mine with certain key similarities to the Buzwagi mine.
Regulatory Update
The Tanzanian Parliament passed a new Mining Law on April 23, 2010, which has
not yet been signed by the President. The new law provides for an increase in
royalties payable on gold sales, which the company does not believe will affect
its current mines in the country because its existing Mineral Development
Agreements ("MDAs") remain unchanged. The MDAs between the Government of
Tanzania and each of the company's mines ensures fiscal stability for the
respective mine. The company continues to review the new law to understand its
scope and application for future projects and will update the market to the
extent necessary following the completion of its review.
Conference call
There will be a conference call for analysts and investors on 27 April 2010 at
12.00 pm (noon) London time. The dial in details are as follows:
Participant dial +44 (0) 203 003 2666
in:
Password: African Barrick Gold or ABG
There will be a replay facility available until 4 May 2010. Access details are
as follows:
Replay number: +44 (0) 208 196 1998
Replay PIN: 9865365#
Operating results
African Barrick Gold Three months ended Year ended
(in US$ '000) 31 March 31
December
(Unaudited) 2010 2009 2009
Sales 210,660 119,695 693,412
Cost of sales 1 (125,512) (89,816) (469,257)
Gross profit 85,148 29,879 224,155
Corporate administration (7,617) (10,123) (48,464)
Exploration and (1,828) (1,476) (8,871)
evaluation
Other charges (3,260) 4,438 (10,714)
Profit before net 72,443 22,718 156,106
finance costs
Finance income 152 23 361
Finance expense (487) (2,725) (6,062)
Net profit before 72,108 20,016 150,405
taxation
Taxation expense (19,055) (6,275) (84,388)
Net profit 53,054 13,741 66,017
Net profit attributable to equity shareholders 53,054 11,631 58,577
1 - Included in cost of sales is an amount of $ 27.4 million ($ 18.3 million Q1
2009) relating to depreciation and amortisation.
Other financial information summary
African Barrick Gold Three months ended Year ended
(in US$ '000 except per 31 March 31
ounce and per share December
figures)
(Unaudited) 2010 2009 2009
Cash and cash equivalents 320,132 39,684 69,726
Cash generated from/(utilised in) operating 67,324 (2,886) 193,961
activities
Capital expenditure 37,644 47,703 223,268
EBITDA 99,694 40,981 249,456
Cash costs per ounce 516 537 533
Basic earnings per share 0.13 n/a n/a
Improved gold prices and significantly increasing ounces sold drove ABG's
EBITDA from $41 million in Q1 2009 to $100 million in Q1 2010. ABG was able to
slightly reduce its overall cash costs through higher by-product revenues and
lower cash costs at both Bulyanhulu and North Mara. The increase in EBITDA was
helped by decreased expenditures on corporate activities in the first quarter
of 2010. Both exploration and corporate costs will increase over the remainder
of the year to account for the additional costs of operating a stand alone
publicly listed company and the execution of an aggressive exploration program
to advance the organic growth opportunities.
Key statistics
African Barrick Gold Three months ended Year ended
(in US$000) 31 March 31
December
(Unaudited) 2010 2009 2009
Operating results 1
Gold production (thousands of ounces) 177 127 716
Gold sales (thousands of ounces) 185 129 684
Per ounce data 2
Average spot gold price 1,109 908 972
Average realised gold price 1,110 886 974
Total cash costs per ounce sold 516 537 533
Amortisation and other per ounce sold 137 128 125
Total production costs per ounce sold 653 665 658
1 - Operating results excludes 30% outside equity gold production ounces at
Tulawaka.
2 - Per ounce data excludes 30% outside equity costs.
Bulyanhulu
Operational results
Bulyanhulu Three months ended Year ended
(in US$ '000) 31 March 31
December
(Unaudited) 2010 2009 2009
Underground ore tonnes Ktpa 244.7 208.9 966.9
hoisted
Ore milled Ktpa 231.1 209.0 959.2
Head grade g/t 9.04 9.39 8.75
Mill recovery % 91.9 93.3 92.1
Ounces produced Oz 61,669 58,854 248,911
Ounces sold Oz 67,193 61,456 255,121
Cash costs/ounces sold US$/oz $513 $584 $651
During Q1 2010, Bulyanhulu experienced more stable production and produced 4.7%
more ounces than the prior year's quarter when the operation experienced a
serious paste-fill line blockage interrupting the underground mine production.
However, Bulyanhulu production was negatively affected in the quarter by a
tragic rock fall incident that resulted in three employee fatalities. Lower
mill recoveries were due to lower head grade processed in Q1 2010 vs. Q1 2009.
Cash costs were 12.1% lower than the prior year period due to improved
by-product credits from improved copper prices and lower costs of consumables.
Management is advancing the prefeasibility study to access the Upper East zone
to seek to increase annual gold production by 2014. A production decision is
expected to be taken in early 2011.
North Mara
Operational results
North Mara Three months ended Year ended
(in US$ '000) 31 March 31
December
(Unaudited) 2010 2009 2009
Tonnes mined Ktpa 1,951 3,894 15,888
Ore tonnes mined Ktpa 683 1,177
Ore milled Ktpa 647 677 2,605
Head grade g/t 3.19 3.10 3.18
Mill recovery % 81.2 79.6 79.7
Ounces produced Oz 53,908 53,659 212,358
Ounces sold Oz 54,468 52,502 209,495
Cash costs/ounces sold $US/oz $445 $527 $508
During Q1 2010, North Mara increased head grade by 3% while decreasing tonnes
milled by 4.4% over the same period in 2009. Improvements in process equipment
and operating practices supported increased metal recovery. Lower cash costs
per ounce were achieved as a result of a lower production strip ratio, reduced
energy costs from utilizing the national power grid over diesel generated power
and lower maintenance costs incurred on the new mining fleet.
In the second half of 2010, a scoping study is expected to be advanced on the
economic potential of the Gokona and Nyabigena underground ore body extensions.
Buzwagi
Operational results
Buzwagi Three months ended Year ended
(in US$ '000) 31 March 31
December
(Unaudited) 2010 2009 2009
Tonnes mined Ktpa 4,562 - 19,843
Ore milled Ktpa 890 - 2,671
Head grade g/t 2.23 - 2.52
Mill recovery % 80.2% - 87.4
Ounces produced Oz 51,304 - 189,031
Ounces sold Oz 51,082 - 153,682
Cash costs/ounces sold $US/oz $585 - $422
The Buzwagi operation began commercial production in the second quarter of
2009. During Q1 2010, the Buzwagi mine continued to work through transition
ore, which has lower grades and reduced mill recoveries than the primary
sulphide ore. We expect to process an increasing amount of primary sulphide ore
during Q2 2010. Cash costs were higher in Q1 than the expected average for 2010
due to this mine sequencing. Lower recoveries and increased cyanide consumption
from processing transition ore resulted in higher unit costs compared to the
processing of primary sulphide ore.
The Golden Ridge project is a satellite shallow ore body located 50 kilometres
from the Buzwagi operation. The project is currently moving into the
feasibility study phase and the project team has been mobilized to perform
sample drilling, metallurgical, environmental, and social studies. A production
decision is expected to be taken in early 2011.
Tulawaka
Operational results
Tulawaka (reflected as Three months ended Year ended
70%)
(inUS$ '000) 31 March 31
December
(Unaudited) 2010 2009 2009
Underground ore tonnes Ktpa 19.3 24.4 83.4
hoisted
Ore milled Ktpa 83.1 71.3 311.8
Head grade g/t 4.09 6.70 7.0
Mill recovery % 93.6 93.3 94.1
Ounces produced Oz 10,214 14,347 65,926
Ounces sold Oz 11,980 14,841 65,389
Cash costs/ounces sold $US/oz $558 $379 $413
Tulawaka underground operation experienced a 21% decline in tonnes hoisted to
surface in Q1 2010 compared to the same period in 2009. This was mainly driven
by lower equipment availability and the processing of lower grade stock pile
ore to offset the mine production shortfall driving down the head grade milled,
resulting in a 29 % reduction of ounces produced compared to the previous year.
Management has mobilized additional haulage trucks from its other operations
and expects the mine to make its original budgeted production. Cash costs per
ounce for the first quarter 2010 increased compared to the prior year period as
a result of the lower production base.
Additional funding has been approved for an aggressive exploration drilling
program for both the underground and open pit resources. Additional equipment
for mine development has been mobilized for delivery to site.
For further information, please visit our website: www.africanbarrickgold.com
or contact:
African Barrick Gold plc
c/o Shearman & Sterling LLP
Broadgate West
9 Appold Street
London EC2A 2AP
Greg Hawkins, CEO +44 (0)207 655 5580
Kevin Jennings, CFO +44 (0)207 655 5581
Finsbury (Financial public relations + 44 (0)20 7251 3801
firm)
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 716,000 attributable ounces in 2009, 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.
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 March 2005.
The ABG's recent exploration focus has been on advancing the exploration
opportunities around its existing mines in order to increase the ABG's reserves
and resources. Historically and prior to ABG's listing on the London Stock
Exchange, the operations of the ABG comprised the Tanzanian gold mining
business of Barrick.
BASIS OF PREPARATION
The financial information has been prepared in accordance with International
Reporting Standards ("IFRS") as adopted by the European Union except as
described below, while its parent, Barrick, reports under US GAAP. Due to the
difference in reporting methods there may be differences in the reported
numbers of each entity.
ABG was not constituted as a separate legal group prior to 24 March 2010. The
combined historical financial information prepared specifically for the
purposes of this quarterly report is prepared on a basis that combines the
results and assets and liabilities of each of the companies constituting the
ABG group by applying the principles underlying to the consolidation procedures
of IAS 27 (revised) 'Consolidation and Separate Financial Statements' ("IAS
27R") for each of the periods to 31 March 2010 and 31 March 2009 and for the
year to 31 December 2009. On such a basis the combined information sets out the
ABG group's financial position as at 31 March 2010, 31 March 2009 and 31
December 2009 and results of operations and cash flows for the three periods
then ended.
IFRS as adopted by the EU does not provide for the preparation of combined
historical information, and accordingly in preparing the combined historical
financial information certain accounting conventions commonly used for the
preparation of historical financial information for inclusion in investment
circulars as described in the Annexure to SIR 2000 (Investment Reporting
Standard applicable to public reporting engagements on historical financial
information) issued by the UK Auditing Practices Board have been applied. The
application of these conventions results in the following material departures
from IFRS. In all other respects IFRS has been applied.
- As explained above, the combined historical financial information is prepared
on a combined basis and therefore does not comply with the requirements of IAS
27R. The financial information has therefore been prepared on a combined basis
applying the principles underlying the consolidation procedures of IAS 27R.
- The combined historical financial information does not constitute a set of
general purpose financial statements under paragraph 3 of IAS 1 'Presentation
of Financial Statements' ("IAS1") and consequently ABG does not make an
explicit and unreserved statement of compliance with IFRS as contemplated by
paragraph 14 of IAS 1. A company is only permitted to apply the first time
adoption rules of IFRS 1 'First time Adoption of International Financial
Reporting Standards' ("IFRS1") in its first set of financial statements where
such an unreserved statement of compliance has been made. Although such a
statement has not been made, the combined financial information has been
prepared as if the date of transition to IFRS is 1 January 2007, the beginning
of the first period presented, and the requirements of IFRS 1 have been applied
as of that date.
NON-IFRS MEASURES
ABG has identified certain measures 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.
Cash costs and cash costs per ounce
Cash costs per ounce sold are a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, by product credits,
and production taxes, and exclude capitalised production stripping costs,
inventory purchase accounting adjustments, unrealised gains/losses from non
hedge currency and commodity contracts, depreciation and amortisation. 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.
EBITDA
EBITDA is a non-IFRS financial measure. ABG calculates EBITDA as net profit or
loss for the period excluding:
- Income tax expense;
- Interest expense;
- Interest income; and
- Depreciation and amortisation (including impairment).
EBITDA is intended to provide additional information to investors and analysts,
and 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.
FORWARD LOOKING STATEMENT
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, and ABG cannot give assurances that such statements will prove
to be correct. Risks, uncertainties and other factors could cause actual events
or results to differ from those expressed or implied by the forward-looking
statements. Factors that could cause or contribute to differences between the
actual results, performance and achievements of ABG include, but are not
limited to, general economic and business conditions, industry trends,
competition, fluctuations in the spot and forward price of gold or certain
other commodity prices, changes in regulation, currency fluctuations (including
the US dollar, South African rand and Tanzanian shilling exchange rates), ABG's
ability to successfully integrate future acquisitions, 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, changes in its
business strategy and political and economic uncertainty, as well as risks and
hazards associated with the business of mineral exploration, development and
mining.
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.
Investors should not place reliance on forward looking statements 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.
END
AFRICAN BARRICK GOLD PLC
© 2010 PR Newswire
