Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc (“Acacia’’) reports interim 2015 results
“Over the first half of 2015 we made further progress at each of our mines, with a particular focus on laying the foundations for the future at Bulyanhulu and North Mara which will ensure that we are in a position by the end of 2015 to generate strong cashflow at and below the current gold price.” said Brad Gordon, Chief Executive Officer of Acacia. “Production at Bulyanhulu increased by 26% over H1 2014, as well as by 16% in Q2 2015 compared to Q1 2015, and we expect further production increases in the second half as we benefit from our investment in the mine; whilst at North Mara we delivered first stoping ore from the Gokona Underground project ahead of schedule in Q2 2015. As a group we delivered production of 367,301 ounces in the first half, an increase of 6% on H1 2014. Our all-in sustaining costs of US$1,133 per ounce sold were 1% higher than H1 2014, principally as a result of investing in the growth of Bulyanhulu and North Mara. As this production is delivered and we continue to drive cost efficiencies; we anticipate that unit costs will decline over the remainder of the year. As a result, we continue to expect our production and costs to be within our guidance range as communicated earlier this year.”
Q2 gold production of 185,641 ounces, 4% higher than Q2 2014, with gold sales of 184,055 ounces
Q2 AISC1 of US$1,149 per ounce sold, 4% higher than Q2 2014
Q2 cash costs1 of US$777 per ounce sold, 4% higher than Q2 2014
H1 gold production of 367,301 ounces, 6% higher than H1 2014, with gold sales of 355,470 ounces
H1 AISC1 of US$1,133 per ounce sold, and cash costs of US$780, respectively 1% and 4% higher than H1 2014
Commenced production from Gokona Underground in Q2 2015, ahead of schedule
Exploration agreement in Western Mali covering 150 square kilometres of prospective ground; expanded footprint in the Houndé belt in Burkina Faso to over 2,400 square kilometres
H1 revenue of US$447 million in line with H1 2014, as increased ounces sold offset the lower gold price
H1 EBITDA1,2 of US$97 million, 26% below H1 2014, impacted by non-cash net foreign exchange revaluation charges of US$15 million, non-cash share-based payment costs of US$8 million and increased cash costs
H1 net earnings2 of US$15 million (US3.6 cents per share)
Operational cash flow of US$107 million, a 16% decrease from H1 2014
Capital expenditure of US$83 million, 28% lower than H1 2014
Cash position increased during Q2 2015 by US$1 million after payment of the final 2014 dividend of US$12 million, to stand at US$287 million as at 30 June 2015
Interim dividend of US1.4 cents per share declared, in line with 2014
Over the past two years we have put in place structural changes to our operations that have been successful in significantly reducing our AISC, which has seen us return to positive free cash generation. As set out in our five year plan, this is an ongoing process aimed at enhancing the long-term viability and attractiveness of our business and will ensure that we are in a position by the end of 2015 to generate strong cashflow at and below the current gold price. We remain on target to meet this objective as Bulyanhulu continues to expand its production levels and reduce its costs over the remainder of 2015 in line with our plans. Enhancements at North Mara and Buzwagi have already driven significant cost improvements to date with the full benefits of the changes still to be fully realised. As a result, whilst we will redouble our focus on driving cost out of the business and optimising our operations, we remain focused on delivering the plan we have previously set out which will enable us to drive returns to our shareholders without having to redesign our business in reaction to the gold price environment.
Following receipt of the required final approvals for the Gokona Underground project from the Tanzanian Vice President’s Office in May 2015, we delivered the first stoping ore from the project in early June, ahead of schedule. During the remainder of the quarter, operations progressed in line with expectations with the majority of the approximately 6,800 contained ounces mined during H1 2015 coming from development ore. We continue to expect the ramp up of the operation over the remainder of 2015.
The Gokona Underground project is expected to produce 450,000 ounces at an average grade of 8.2 g/t over a 5 year life of mine, with all-in sustaining costs of under US$750 per ounce sold. We are confident that the existing reserve will be extended as we increase our understanding of the ore body beneath the open pit.
Appointment of Chief Operating Officer
In June 2015, Michelle Ash was appointed as Chief Operating Officer (“COO”). Michelle joined Acacia in October 2013 as Executive General Manager, Business Improvement and Planning and has driven significant change across our operations in that time. Michelle has led the creation of our Business Improvement structures and strategy, playing an integral role in strengthening planning processes, enhancing operational performance and implementing our cultural change programme. Michelle has more than 20 years of experience in the mining and manufacturing industries, including senior roles as Head of Alliance Planning and Co-ordination for the BHP Mitsubishi Alliance and General Manager Strategy for MMG.
In addition to her primary responsibilities as COO, Michelle is currently Acting General Manager of Bulyanhulu. A new General Manager for Bulyanhulu has been recruited and will be starting in September 2015, at which point Michelle will re-locate from Bulyanhulu to Dar es Salaam.
As previously announced, the devaluation of the Tanzanian shilling has had a negative effect on our Shilling denominated indirect tax receivables. Over the first half of the year, the Tanzanian shilling has lost 17% of its value against the US dollar. This resulted in a foreign exchange revaluation loss of US$20 million, which is included in earnings.
During the second quarter, we received gross indirect tax refunds of US$21 million from the Government of Tanzania, but saw a net cash outflow of indirect tax of US$9 million, prior to currency adjustments. We will continue to engage with the Government on this matter over H2 2015. As at 30 June 2015, the outstanding amount relating to the total indirect tax receivable, not covered by the 2011 Memorandum of Settlement, stood at US$51 million.
Expansion of Exploration activities in West Africa
In late H1 2015, Acacia signed agreements with local Malian entities for the acquisition of equity interests in three exploration licences located within the “Keneiba Inlier” region in Western Mali. The properties cover over 150 square kilometres along the world class Senegal-Mali Shear Zone (“SMSZ”), which is host to more than 50 million ounces of gold. The properties are ideally located over regional geochemical soil anomalies with a lack of modern exploration. The agreements allow for Acacia to earn a 95% interest in each of the licences over a 30 month period.
Acacia’s exploration team have already commenced scout work and regolith mapping to determine areas suitable for soil sampling and those requiring auger or RAB/Aircore drilling. Planned field work for H2 2015 is scheduled to commence in October-November 2015, after the wet season, and will focus on surface geochemical programmes and reconnaissance RAB/Aircore/auger drilling.
Furthermore, we continued to expand our footprint in the prospective Houndé Belt in Burkina Faso through the signing of two further earn-in agreements with Canyon Resources and Thor Explorations Ltd. The Thor Explorations agreement allows Acacia to earn up to an 80% interest in the Central Houndé Project, with an initial earn-in of a 51% interest by the completion of agreed exploration expenditures over a three year period, with an additional 29% interest to be earned by the completion of a pre-feasibility study on a mineral resource on the project area. The Canyon Resources agreement allows Acacia to earn up to a 75% interest in the Pinarello and Konkolikan projects by the completion of an up-front cash payment and agreed exploration expenditure over a two year period. Planned exploration spend in West Africa in 2015 is expected to be US$7 million
In line with our policy of declaring 15% – 30% of cash flow before expansion capital, dividends and financing costs as a dividend to our shareholders, we are pleased to announce that the Board of Directors have approved the payment of an interim dividend of US1.4 cents per share, in line with the 2014 interim dividend. This dividend is based on our expected full year cash generation as defined above, and is payable in line with our policy of paying one third of the dividend as an interim dividend. The dividend will be paid on 25 September 2015 to shareholders on the register on 28 August 2015.
Acacia will declare the interim dividend in US dollars. Unless a shareholder elects to receive dividends in US dollars, they will be paid in pounds sterling with the US dollar amount being converted into pounds sterling at the exchange rate prevailing at the time. The last date for receipt of currency elections will be 1 September 2015. The exchange rate for the conversion of the interim dividend will be elected on or around 3 September 2015.
Over the first half of 2015 our mines showed continued progress as we laid the foundations for the second half of the year and beyond at Bulyanhulu and North Mara. As we move into H2 2015, we expect the contribution from Bulyanhulu to continue to increase quarter on quarter as we deliver improved grades and tonnage as a result of the investment in development, maintenance and improved mining practices. At North Mara, we expect the head grade to remain similar to Q2 2015 as the Gokona Underground ramps up to replace ounces previously sourced from the Gokona open pit within the mill feed. At Buzwagi, we expect the grade to remain around or slightly above reserve grade in the second half, with throughput levels anticipated to remain at nameplate capacity.
As a result of a continued financial discipline we now expect capital expenditure for the year to be between US$200-220 million. Sustaining capital (including land purchases) is expected to be US$80-90 million with capitalised development expected to total US$120-130 million. Capitalised development continues to be driven by increased development activity at Bulyanhulu which commenced in 2014, and is focused on opening additional mining areas, and at North Mara as the Gokona Underground is ramped up.
As a result, we maintain our full year production guidance of 750,000 – 800,000 ounces for 2015 at a cash cost per ounce, including royalties, of between US$695-725 per ounce sold. The planned reduction in capital expenditure is broadly offset by higher corporate administration and share-based payment costs which results in unchanged guidance for all-in sustaining costs of between US$1,050 – US$1,100 per ounce sold. Primarily as a result of the ramp up at Bulyanhulu, the fourth quarter is anticipated to be the strongest quarter for production and consequentially the lowest for cash costs and AISC.
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