21st Apr 2011 07:00
AFRICAN BARRICK GOLD PLC
LSE: ABG
First Quarter Report for the three months ended 31 March 2011 21 April 2011
Based on IFRS and expressed in US Dollars
African Barrick Gold plc ("ABG'') reports first quarter results
â†' Production on track - results in line with expectations - guidance maintained
Financial Highlights
* Revenue increased by 20% to $267 million for the quarter * Average realised gold price of $1,392 per ounce, up 25% year-on-year; cash margin up 24% at $734 per ounce * EBITDA increased to $105 million for the quarter * Operational cash flow of $87 million, 29% higher than prior year period * Net income for the quarter of $50 million, with EPS of 12.3 cents * Net cash position of $434 million at 31 March 2011 * Significant investment in exploration
Operational Highlights
* Production from all four operating mines in line with expectations for the quarter * Attributable production of 173,907 ounces, down 2% year-on-year * Cash costs of $658 per ounce, up 28% year-on-year, driven by impact of waste stripping at North Mara and ongoing higher costs at Buzwagi, both of which are expected to decline over the course of the year * Ongoing drilling at Tulawaka targeting further mine life extension following the initial mine life extension announced in February * Feasibility studies at Golden Ridge, North Mara underground and Bulyanhulu Upper East progressing as expected * Initial resource declared at Golden Ridge during the quarter * Further positive drill intercepts at the Nyanzaga project African Barrick Gold Three months ended Year ended 31 March 31 March % change 31 December 2011 2010 2010 (Unaudited) Attributable Gold 173,907 177,095 (2%) 700,934 production (ounces)1 Attributable Gold sales 172,003 184,724 (7%) 724,083 (ounces)1 Cash costs ($/ounce)2 658 516 28% 569 Average realised gold 1,392 1,110 25% 1,240 price ($/ounce)2 (in $ '000) Revenue3 266,627 221,618 20% 975,021 EBITDA2 104,855 99,694 5% 419,167 Cash generated from 86,684 67,324 29% 345,141 operating activities Net profit attributable 50,362 53,054 (5%) 218,103 to shareholders Basic earnings per 12.3 12.9 (5%) 53.2 share (EPS) (cents)
1 Production and sold ounces reflect equity ounces which exclude 30% of Tulawaka's production base.
2Cash costs per ounce sold, average realised gold price and EBITDA are Non-IFRS financial performance measures with no standard meaning under IFRS. Refer to "Non-IFRS Measures" on page 12 for definitions of each measure.
3 Restated to reflect the inclusion of co-product sales in revenue.
Commenting on the results, CEO Greg Hawkins said: "All four of our mines delivered in line with our expectations for the quarter. Bulyanhulu has continued to build on the progress made last year, the waste stripping programme at North Mara is moving along as expected, production levels have improved at Buzwagi and Tulawaka has renewed momentum following the mine life extension. As we move into the second half of the year, we expect to see additional production and improvement in cash costs, as a result of operational scheduling, in line with our current guidance. Meanwhile, our portfolio of projects continues to lay the foundations for future production growth and our three feasibility studies remain on target to be finalised this year."
For further information, please visit our website: www.africanbarrickgold.com or contact:
African Barrick Gold plcGreg Hawkins, CEOKevin Jennings, CFO
Andrew Wray, Head of Corporate Devt. & Investor Relations +44 (0)207 129 7155
Finsbury (Financial public relations firm) +44 (0)20 7251 3801
Andrew MitchellCharles ChichesterAbout ABG
ABG is Tanzania's largest gold producer and one of the five largest gold producers in Africa. We have four producing mines, all located in north west Tanzania, and several exploration projects at various stages of development. With a high-quality asset base, solid growth opportunities and a clear strategy, we have the objective of increasing our existing production to one million ounces per year by 2014.
We aim to achieve this by:
* driving operating efficiencies to optimise production from our existing asset base; * growing through near mine expansion and development of advanced-stage projects; and * organic greenfield growth and acquisitions in Africa.
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. Historically and prior to our initial public offering (IPO), our operations comprised the Tanzanian gold mining business of Barrick Gold Corporation (Barrick), our majority shareholder.
ABG reports in US dollars in accordance with IFRS as adopted by the European Union, unless otherwise stated in this report.
Conference call
There will be a conference call for analysts and investors on 21April 2011 at 12.30 pm London time. The dial in details are as follows:
Participant dial in numbers: +44 (0) 203 003 2666 UK Toll
0808 109 0700 UK Toll Free+1 212 999 6659 US Toll+1 866 966 5335 US Toll FreePassword: ABGThere will be a replay facility available for 7 days thereafter. Access detailsare as follows:Replay number: +44 (0) 208 196 1998Replay PIN: 1809699#FORWARD LOOKING STATEMENTS
This report includes "forward-looking statements" that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical facts. These statements include, without limitation, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words `plans,' `expects,' `anticipates,' `believes,' `intends,' `estimates' and other similar expressions.
All forward-looking statements involve a number of risks, uncertainties and other factors. Although ABG's management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of ABG, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements contained in this report. Factors that could cause or contribute to differences between the actual results, performance and achievements of ABG include, but are not limited to, political, economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations (including the US dollar; South African rand and Tanzanian shilling exchange rates), ABG's ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, and to timely and successfully process its mineral reserves, risk of trespass, theft and vandalism, changes in its business strategy, as well as risks and hazards associated with the business of mineral exploration, development, mining and production. Accordingly, investors should not place reliance on forward looking statements contained in this report.
The forward-looking statements in this report reflect information available at the time of preparing this report. Subject to the requirements of the Disclosure and Transparency Rules and the Listing Rules or applicable law, ABG explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward- looking statements in this report that may occur due to any change in ABG's expectations or to reflect events or circumstances after the date of this report. No statements made in this report regarding expectations of future profits are profit forecasts or estimates, and no statements made in this report should be interpreted to mean that ABG's profits or earnings per share for any future period will necessarily match or exceed the historical published profits or earnings per share of ABG or any other level.
Key statisticsAfrican Barrick Gold plc Three months ended Year ended 31 March 31 December (Unaudited) 2011 2010 2010 Operating results Tonnes mined (thousands of tonnes) 11,760 9,337 40,016 Ore tonnes mined (thousands of tonnes) 1,608 2,119 7,970 Ore tonnes processed (thousands of 1,920 1,851 7,706 tonnes) Recovery rate (percent) 87.2% 85.0% 86.1% Average grade (grams per tonnes) 3.2 3.5 3.3 Attributable Gold production (ounces) 173,907 177,095 700,934 1 Attributable Gold sold (ounces) 1 172,003 184,724 724,083 Copper production (thousands of 3,742 1,712 7,958 pounds) Copper sales (thousands of pounds) 3,734 3,044 13,370 Cash cost per tonne milled2 71 53 55 Per ounce data ($) Average spot gold price3 1,386 1,109 1,225 Average realised gold price2 1,392 1,110 1,240 Total cash costs per ounce sold2 658 516 569 Amortisation and other costs per ounce 176 137 147 sold2 Total production costs per ounce sold2 834 653 716 Cash margin per ounce sold2 734 594 671 Average realised copper price ($/lb) 2 4.53 3.22 3.55 Financial results (in $ '000 and Unaudited) Revenue4 266,627 221,618 975,021 Cost of sales4 (168,152) (136,470) (589,039) Gross profit 98,475 85,148 385,982 Corporate (12,858) (7,617) (35,436) administration Exploration and (7,458) (1,828) (14,861) evaluation Other charges (4,670) (3,260) (26,033) Profit before 73,489 72,443 309,652 net finance costs Finance income 372 152 1,202 Finance expense (1,881) (487) (1,777) Net profit 71,980 72,108 309,077 before taxation Taxation expense (20,168) (19,055) (86,471) Net profit for 51,812 53,053 222,606 the period Non-controlling interests (1,450) 1 (4,503) Net profit attributable to 50,362 53,054 218,103 shareholders Other financial information African Barrick Gold Three months ended Year ended 31 March 31 December (in $ '000 except per ounce 2011 2010 2010 and per share figures and unaudited) Cash and cash equivalents 433,817 320,132 401,012 Cash generated from operating 86,684 67,324 345,141 activities Capital expenditure5 51,391 37,644 224,391 EBITDA2 104,855 99,694 419,167 Basic earnings per share (EPS) (US$ 12.3 12.9 53.2 cents) Operational cash flow per share2 (US$ 21.1 16.4 84.2 cents) Equity 2,593,861 2,284,290 2,543,085
1 Production and sold ounces reflect equity ounces which exclude 30% of Tulawaka's production base.
2 Cash cost per tonne milled, average realised gold price, total cash cost per ounce sold, amortisation and other costs per ounce sold, total production cost per ounce sold, cash margin per ounce sold, average realised copper price, EBITDA and operational cash flow per share are Non-IFRS financial performance measures with no standard meaning under IFRS. Refer to `Non-IFRS measures' on page 12 for definitions.
3 Reflects the London PM fix price.
4 Restated to reflect the inclusion of co-product sales in revenue
5 Excludes acquisition of Tusker Gold Limited and includes non-cash reclamation asset adjustments during the year.
Operating update for the three months ended 31 March 2011
Attributable gold production for the quarter totalled 173,907 ounces, a 2% decrease compared to 177,095 ounces in the corresponding quarter of 2010. We saw lower production principally at North Mara, where the main focus shifted to the significant waste stripping programme in the Gokona and Nyabirama pits in order to be able to access higher grade material in the coming years. All the other mines sites produced ounces in excess of the prior year period.
Tonnes mined for the quarter were 11.8 million compared to 9.3 million in the corresponding quarter of 2010. The increase was driven primarily by North Mara's focus on waste stripping and increased waste tonnes mined at Buzwagi.
The average grade for the quarter was 3.2 grams per tonne which was 9% lower than the prior year period. The decrease was mainly due to the processing of low grade stockpiles at North Mara. This was partially offset by the improved grade mined at Buzwagi as it accessed higher grade zones over the quarter.
Copper production for the quarter was 3.7 million pounds compared to 1.7 million pounds in the corresponding quarter of 2010. The increase was principally due to additional copper production from Buzwagi related to concentrate produced.
Cash costs for the quarter were $658 per ounce sold, a 28% increase compared to $516 in the corresponding quarter of 2010. Costs were impacted by the effect of the waste stripping programme at North Mara, higher waste stripping at Buzwagi, and the global inflationary pressure and increasing commodity prices. Revenue related costs in the form of royalties and refining fees increased in line with revenue and increased concentrate sales. Cost pressure was partially offset by increased co-product revenue. Gold ounces sold for the quarter were 172,003 ounces, down 7% compared to 184,724 in the corresponding quarter of 2010. Sales ounces for 2010 were positively impacted by the sale of backlog concentrate built up at Bulyanhulu from the end of 2009.
Financial Results
Revenue for the quarter totalled $266.6 million compared to $221.6 million for the corresponding quarter of 2010. The decrease in ounces sold was more than offset by the 25% increase in the average realised gold price to $1,392 per ounce during the quarter. Co-product revenues, included in total revenues, were $19.5 million compared to the prior year period of $11.0 million. This was driven by the combination of increased prices and volume sold. Realised copper prices for the quarter amounted to $4.53 per pound against $3.22 in prior year.
Despite the increase in cash costs, our cash margin per ounce of gold sold, being the average realised price per ounce sold less the average cash cost per ounce sold, increased to $734 per ounce during the quarter. This represents a 24% increase from $594 per ounce for the corresponding quarter of 2010.
EBITDA for the quarter was $104.9 million compared to $ 99.7 million in the corresponding quarter of 2010. The increase in revenue was partially offset by higher cash costs, increased exploration spending and higher corporate administration costs as a result of operating as a fully functional listed entity. Other charges for the quarter related predominantly to foreign exchange losses.
Our resulting attributable net profit for the quarter was $50.4 million compared to $53.1 million in the corresponding quarter of 2010. This represented a basic EPS for ABG of 12.3 cents for the quarter compared to 12.9 cents for the corresponding quarter of 2010. The decrease was driven by increased depreciation due to a higher fixed asset base compared to prior year, an increase in finance expenses relating to charges associated with the credit facility and a higher non-controlling interest expense as a result of the improved Tulawaka earnings performance.
Capital expenditure incurred for the quarter amounted to $51.4 million compared to $37.6 million in the prior year period. The increase during the quarter was due to the focus on a number of key investment projects, such as the deferred stripping at the Gokona and Nyabirama open pits, the water treatment plant and the tailings storage facility expansion at North Mara, the Bulyanhulu underground infrastructure development and the Tulawaka life of mine extension.
Cash flow generated from operations was $86.7 million for the quarter compared to $67.3 million in the corresponding quarter of 2010 and net cash was $434 million at the end of the quarter. Operational cash flow per share amounted to 21.1 cents, 29% higher than the prior year period of 16.4 cents. The working capital outflow of $18.5 million related to an increase in critical supplies on hand supporting our operations and an outflow in payables from year end. This was partially offset by the inflow from concentrate receivables.
Mine site summaryBulyanhulu Three months ended Year ended 31 March 31 December (Unaudited) 2011 2010 2010 Underground ore tonnes Kt 267 245 958 hoisted Ore milled Kt 253 231 954 Head grade g/t 8.9 9.0 9.2 Mill recovery % 91.8% 91.9% 92.2% Ounces produced oz 66,265 61,669 259,873 Ounces sold oz 69,107 67,193 262,442 Cash costs/ounces sold $/oz 584 513 539 Cash cost per tonne $/t 159 149 148 milled Capital expenditure $(000) 16,216 13,401 80,539
Gold production at Bulyanhulu for the quarter was 66,265 ounces, a 7% increase over the prior year period. Increased production was primarily driven by the increase in ore tonnes hoisted and improved mill throughput compared to the prior year, with recoveries and grade at similar levels year-on-year.
Cash costs for the quarter were $584 per ounce sold, which was 14% higher than the prior year period of $513. The increase was predominantly seen in the areas of labour, diesel and supplies. The increase in labour costs was a combination of a rise in staffing levels together with annual salary increases. Higher levels of mining activity were also reflected in energy and maintenance costs. This was partially offset by higher copper revenue driven by both volume and price. As a result, cash costs per tonne milled were $159 compared to the prior year period of $149.
As a part of our risk management process, management has been investing more in critical supplies at site and qualifying more suppliers to mitigate any production impact from unplanned events.
Capital expenditure for the quarter was $16.2 million compared to $13.4 million in the prior year period. The increase during the quarter was principally due to investments in underground mine development and mobile mining equipment. Underground development costs amounted to $7.5 million.
Following the end of the quarter, on 9 April there was a rock fall incidentunderground at Bulyanhulu which resulted in the tragic death of one of ouremployees. Mining activities were immediately suspended to allow the minerescue team to commence the rescue and recovery mission but unfortunatelyrescue attempts were unsuccessful. Processing operations resumed the followingday and mining operations on 11 April. A team of specialist investigators willcarry out a full and thorough investigation of the accident. This incident isdeeply regrettable and our thoughts are with our employee's friends and familyat this difficult time.Mine site summaryNorth Mara Three months ended Year ended 31 March 31 December (Unaudited) 2011 2010 2010 Tonnes mined Kt 6,136 4,510 20,106 Ore tonnes mined Kt 279 683 2,624 Waste Kt 5,857 3,828 17,482 Ore milled Kt 750 647 2,860 Head grade g/t 2.0 3.2 2.8 Mill recovery % 78.7% 81.2% 82.9% Ounces produced oz 37,599 53,908 212,947 Ounces sold oz 35,950 54,468 218,684 Cash costs/ounces sold $/oz 760 445 472 Cash cost per tonne $/t 36 37 36 milled Capital expenditure $(000) 27,675 16,460 91,442
The plan for 2011 at North Mara continues to focus on the significant waste stripping programme in the Gokona and Nyabirama pits in order to be able to access higher grade material in the coming years. This will, as expected, deliver lower production levels throughout 2011, although we would anticipate improvements later in the year, much higher movement of waste material, increased reliance on lower grade stockpiles, higher cash costs and additional capital investment compared to the prior year.
These factors were evident in gold production for the quarter of 37,599 ounces, which was 30% lower than the prior year period production of 53,908 ounces. The strip ratio in the Gokona and Nyabirama pits was significantly higher during the quarter, although we would expect to see this decline as we progress through 2011 which will also improve the grade profile. The throughput of ore milled increased 16%, predominantly due to better plant availability and the processing of higher levels of stockpiled material, albeit at lower head grades resulting in lower recoveries.
Cash costs for the quarter were $760 per ounce sold compared to $445 in the prior year period. The increase during the quarter was primarily driven by the lower production base, higher throughput and a similar fixed cost base compared to the prior year period. Cash costs were also impacted by inflationary pressures similar to those experienced at other sites, namely labour, energy and external services (principally maintenance and repair/drilling contracts). The increase in diesel and energy costs was mainly as a result of the expected increase in mining and milling activity.
Capital expenditure for the quarter amounted to $27.7 million compared to $16.5 million in the prior year period. The increase over the quarter was predominantly driven by the investment in waste stripping at Gokona and Nyabirama and capitalized exploration drilling, which amounted to $14.9 million and $2.5 million respectively. Sustaining capital during the quarter was $10.3 million, with key ongoing projects including the gold plant expansion, water treatment plant and the expansion of the tailings storage facility.
Mine site summaryBuzwagi Three months ended Year ended 31 March 31 December (Unaudited) 2011 2010 2010 Tonnes mined Kt 5,326 4,562 18,848 Ore tonnes mined Kt 1,032 1,172 4,285 Ore milled Kt 841 890 3,553 Head grade g/t 2.4 2.2 2.0 Mill recovery % 86.9% 80.2% 81.0% Ounces produced oz 56,313 51,304 186,019 Ounces sold oz 54,101 51,082 198,221 Cash costs/ounces $/oz 667 585 685 sold Cash cost per tonne $/t 43 34 38 milled Capital expenditure $(000) 2,984 5,434 29,781
The quarter at Buzwagi saw further progress building on that achieved towards the end of the previous quarter. Gold production for the quarter was 56,313 ounces, an increase of 10% compared to the first quarter of 2010 (51,304 ounces) and an increase of 27% on the fourth quarter of 2010 (44,257 ounces). The improvements in production levels have largely been driven by increased grade from mining operations, although access to the pit was hampered by flood conditions at the end of the quarter. The improvements in grade follow a marked increase in production metres drilled over the end of 2010 and into the first quarter of 2011, with monthly rates more than doubling over the last six months and significantly higher than their average during 2010. Together with better mobile equipment availability which has pushed up mining rates, these improvements have enabled us to access higher grade zones over the first quarter whilst still moving additional waste tonnes to support future production levels.
Mill throughput has continued to be a critical point of focus for management. Continued power outages combined with mechanical issues in the milling area resulted in 6% lower throughput compared to Q1 2010. Recoveries increased as a result of the higher head grade from mining activities. We are implementing the following major modifications in the coming months to improve overall performance at the process plant by increasing throughput and recoveries:
* The installation of 6MW of spinning diesel back up power to help mitigate the impact of frequent power outages from the national grid. The units are on their way to the site and are expected to be installed during the next 3 months. * The installation of new, oversized pebble ports on the SAG mill discharge end. These will help to reduce the impact of oversize material staying in the circuit resulting from the higher than expected grind index of the material being fed to the plant. These will also be installed during the next 3 months and should lead to improved throughput. * Upgrade of the detoxification circuit for improved recoveries and lower soluble copper levels. This is expected to be completed during Q1 2012.
We are likely to continue to experience higher volatility in the performance of the plant until the backup power and pebble ports are installed. However, with the impact of these initiatives in the process plant, supported by the improved mining rates and lower waste removal as the year progresses, Buzwagi will be well positioned to build on current production levels in the second half of the year and also to improve the cost profile of its production.
Cash costs for the quarter were $667 per ounce sold, an increase of 14% compared to the prior year period ($585 per ounce sold). However, cash costs were 23% lower when compared to the fourth quarter of 2010 and we would expect to see further improvements in cash costs reduction as we go through 2011. The increase in cash costs for the quarter when compared to the corresponding quarter in 2010 is primarily due to the increase in the strip ratio (4.2) compared to that for the first quarter of 2010 (2.9), together with increased inflationary pressure especially in labour, consumables and contracted services. Additional mining costs were incurred to move more waste tonnes to recover from the impact of lower mining productivity due to the fuel theft disruption in 2010. Labour costs increased as a result of wage inflation and investment in additional security and management resource at the mine. Sales related costs increased in line with increased revenue, while copper co-product revenue resulting from the higher concentrate sales partially offset the increase in cash costs. Cash costs were 23% lower than Q4 2010 and we would expect to see further improvements as we go through 2011.
Capital expenditure for the quarter was $3.0 million compared to $5.4 million in the corresponding period in 2010 with a higher investment in mobile equipment during the prior year period. Capital investment so far in 2011 has been primarily focused on the delivery of mobile mining equipment, with deliveries expected to accelerate in the second and third quarter this year.
Mine site summaryTulawaka (reflected as Three months ended Year ended70%) 31 March 31 December (Unaudited) 2011 2010 2010 Underground ore tonnes Kt 30 19 103hoisted Ore milled Kt 77 83 340 Head grade g/t 5.9 4.1 4.1 Mill recovery % 93.6% 93.6% 93.2% Ounces produced oz 13,731 10,214 42,094 Ounces sold oz 12,845 11,980 44,736 Cash costs/ounces sold $/oz 738 558 709 Cash cost per tonne $/t 123 81 93milled Capital expenditure $(000) 3,895 2,279 15,513(100%)
Attributable gold production at Tulawaka for the quarter was 13,731, an increase of 34% compared to the prior period of 10,214 ounces. The increase in production was driven by higher grade underground zones being mined over the quarter, as well as a greater proportion of the ore milled in the process plant coming from underground compared to the previous year. The mining performance underground was significantly better than in the prior year period due to the problems with equipment availability in the first part of last year. Throughput in the process plant was impacted by harder rock associated with the higher grade ore processed.
Cash costs for the quarter were $738 per ounce sold compared to $558 in the prior year period. The cash cost increase was driven by an increase in labour and maintenance costs to deal with an expanding underground mine operating environment and the focus on the life of mine extension. As a result the cash cost per tonne milled for the quarter rose to $123 compared to $81 in the first quarter of 2010..
Capital expenditure for the quarter totalled $3.9 million compared to $2.3 million in the prior year period. During the quarter Tulawaka continued to focus on an aggressive exploration drilling programme for both the underground and open pit resources in order to extend its mine life beyond 2012. This programme was supported by investment in additional mining equipment to increase exploration development and to support further mine life extension. During the quarter, capitalised exploration drilling, expansion capital and sustaining capital each represented $1.3 million of expenditure.
Exploration Update
Exploration and development during the quarter continued to focus on ABG's strategy of organic growth through near-mine exploration, resource expansion, optimization of existing assets through identification and delineation of higher grade satellite deposits, regional exploration for new discoveries and evaluation of acquisition opportunities throughout Africa. The Exploration and Technical Services teams have been principally focused on advancing the organic growth projects around each of the current Tanzanian operations, as well as advancing the exploration programs at North Mara and the Nyanzaga Project. Good progress continues to be made on all projects.
Nyanzaga Project
At the Nyanzaga Project infill and step-out reverse circulation and diamond core drilling continued on the Tusker-Kilimani resource area. The drill programme is also testing geophysical and geochemical targets across the Nyanzaga project area for large-scale gold deposits and additional satellite opportunities within 15km of the Tusker resource area. During the quarter a total of 28,945 metres of reverse circulation and diamond core were drilled in 122 holes across the project area, which was well above forecast due to the drier than normal wet season allowing un-interrupted access to targets.
Drilling to date on the Tusker depth extensions has validated the geological interpretation and has continued to justify the deeper drilling, especially on the southern and central parts of the resource area, where further extensions to the wide, higher grade zones have been intercepted in recent drilling at depths greater than 500m vertically below surface, as reported in the March 2011 press release. These deeper, higher grade intercepts at Tusker indicate the potential for the delineation of large bulk mineable blocks at >6g/t gold over several hundreds of metres both along strike and down-dip. The wide higher grade blocks could significantly impact on open pit mining scenarios or may be amenable to underground.
The current drill programme at Tusker is focused on completing the infill drilling on the bulk of the main resource area to 40m x 40m and 40m x 80m centres in order to complete a revised resource estimate in the second half of 2011.
North MaraUnderground Extension
A significant resource drill-out programme beneath the planned Gokona and Nyabigena open pits is scheduled to commence early in the second quarter of 2011. This is aimed at increasing the initial Indicated resource of 370Koz declared in late 2010 into an Indicated resource in excess of 1Moz, thereby improving the potential to significantly extend the mine life and production profile at North Mara. The feasibility study to assess the Gokona-Nyabigena underground potential is on schedule for completion in mid-2011.
Exploration drill programmes at Gokona to investigate extensions of these underground deposits and to test for additional high-grade shoots, particularly between Gokona West and Gokona East Deeps lodes, were completed during the quarter. Results from the deep exploration drilling programme were positive and show the potential to extend several high grade lodes at depths greater than 400m below the planned final open pit design limits and beyond. The resource drill-out, being undertaken by the Mine Geology team at North Mara, consists of an extensive (62,000m) infill reverse circulation and diamond core programme and will commence in April 2011, slightly behind schedule due to site access and rig availability issues.
Nyabirama Resource Definition and Extension Drilling
The Nyabirama programme is aimed at defining underground or push-back ounce potential from areas previously not able to be drilled from the open pit or during early exploration drilling. Infill drilling is targeting the conversion of approximately 700Koz of resources from Inferred to Indicated status. Extension drilling is also being undertaken with the aim of identifying additional ounces east and west along strike. The current drill programme consists of approximately 37,000 metres of reverse circulation and diamond core drilling. To date 3,000 metres has been drilled and results for four holes have been returned with three holes returning multiple zones of high grade mineralisation including:
NBD001 12.0m @ 3.12g/t from 193m
2.8m @ 70.36g/t from 241.43m
6.6m @ 3.63g/t from 266.38m
NBRD003 2.0m @ 9.85g/t Au from 91m
13.0m @ 11.89g/t Au from 197m
7.0m @ 5.91g/t Au from 223m
NBRD008 3.0m @ 4.25g/t from 101m
4.0m @ 7.81g/t from 134m5.0m @ 6.03g/t from 239m8.0m @ 5.59g/t from 250m3.9m @ 3.28g/t from 281.24m
Whilst these initial results are very encouraging it is still early in the programme to attribute particular significance to them.
Golden Ridge
An initial open pit mineral resource of 527Koz @ 2.94g/t Au Indicated and 152Koz @ 2.52g/t Au Inferred was declared for Golden Ridge during the quarter, validating the earlier desktop work investigating the potential to truck Golden Ridge ore to the Buzwagi mine. Further exploration drilling programmes are schedule to commence in the second quarter of 2011 to investigate extensions of the higher grade shoots on the margins of the current pit design in order to delineate additional higher grade resource ounces, particularly between the northern and southern zones of the main pit. At the same time, we aim to finalise the feasibility study on Golden Ridge around the middle of 2011 and, subject to internal review and approvals, subsequently move into the project execution phase.
Tulawaka
East Zone Underground Extensions
During the quarter, at the Tulawaka East Zone underground, diamond core drilling continued with 4,993 metres drilled out of the planned 12,200 metre programme. A second underground rig is being commissioned to increase drilling rates in order to establish the potential for further resource and reserve definition leading to additional mine life extension. The current programme is targeting high grade mineralised shoots within Zones 250-500 between Levels 10 and 12, below the current reserves. The initial drill results returned from this programme indicate that the mineralization is exhibiting the same characteristics as in the upper levels. The first results returned in March include the following:
TUGD00305 - 1.5m @ 14.69g/t from 103.5m
TUGD00306 - 3.0m @ 5.62g/t from 105m
TUGD00315 - 1.6m @ 7.81g/t from 74.4m
TUGD00317 - 3.2m @ 23.63g/t from 64.85m
TUGD00322 - 2.5m @ 11.29g/t from 71.0m
Further information with respect to the potential mine life extension at Tulawaka will be released once an updated model and reserve optimisation is completed
BulyanhuluBulyanhulu Upper East
The feasibility study for the Upper East project continued during the quarter, as did rehabilitation and dewatering work in this zone. A major project focus during the period was on the proposed mining methods in this area and a detailed mine planning workshop was held. Work has also commenced on the detailed design and scheduling of a proposed test stope. During the coming quarter as the feasibility study work moves towards completion risk assessment and change management activities will also be conducted on site.
Other developments
Availability of power supply
Unseasonably dry conditions in Tanzania meant that during the first quarter of 2011 water levels at certain of the facilities providing hydropower for the national grid were at extremely low levels. This resulted in a decrease in available power supplies and the possibility of load shedding being imposed on certain industrial sectors, potentially including the mining industry. Recent rainfall has replenished water levels and removed this possibility for the time being. At the same time, the national electricity supplier, TANESCO, is moving ahead with commissioning additional generating capacity in order to alleviate this issue in the future. We also continue to work with TANESCO to help improve the reliability of power supplies in the network. Generally, we will continue to monitor developments in power supply and the impact that this may have on our operations.
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 gains and losses on non hedge derivative contracts
- Unrealised mark to market gains and losses on provisional pricing from copper and gold sales contracts; and
- Export duties.
Total cash costs per ounce sold is a non-IFRS financial measure. Cash costs include all costs absorbed into inventory, as well as royalties, co-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 and social development costs. Cash cost is calculated net of co-product revenue and is measured on a co-product basis. The change in the cash cost measurement to include co-product revenue follows a decision by management to present the sale of copper and silver as co-product revenue and part of total 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 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.
Cash margin per ounce sold is a non-IFRS financial measure. It is calculated by subtracting the cash costs per ounce sold from the average realised gold price per ounce sold.
Average realised copper price per pound is a non-IFRS financial measure. It is calculated by dividing the total revenues from copper by the total pounds of payable copper sold.
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; and * Goodwill impairment charges.
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.
Amortisation and other cost per ounce sold is a non-IFRS financial measure. Amortisation and other costs include amortisation and depreciation expenses and the inventory purchase accounting adjustments at ABG's producing mines. ABG calculates amortisation and other costs based on its equity interest in production from its mines. Amortisation and other costs per ounce sold is calculated by dividing the aggregate of these costs by ounces of gold sold. Amortisation and other cost per ounce sold are calculated on a consistent basis for the periods presented.
Cash cost per tonne milled is 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 and social development costs. Cash cost is calculated net of co-product revenue and is measured on a co-product basis. ABG calculates cash costs based on its equity interest in production from its mines. Cash costs per tonne milled are calculated by dividing the aggregate of these costs by total tonnes milled.
Operating cash flow per share is a non-IFRS financial measure. It is calculated by dividing net cash generated by operations by the weighted average number of ordinary shares in issue.
Mining statistical information
The following describes certain line items used in the ABG Group's discussion of key performance indicators:
* Open pit material mined - measures in tonnes the total amount of open pit ore and waste mined. * Underground ore tonnes hoisted - measures in tonnes the total amount of underground ore mined and hoisted. * Total tonnes mined include open pit material plus underground ore tonnes hoisted. * Strip ratio - measures the ratio waste-to-ore for open pit material mined. * Ore milled - measures in tonnes the amount of ore material processed through the mill. * Head grade - measures the metal content of mined ore going into a mill for processing. * Milled recovery - measures the proportion of valuable metal physically recovered in the processing of ore. It is generally stated as a percentage of the metal recovered compared to the total metal originally present. * Total production costs - measures the total cost of production and is an aggregate of total cash costs as well as production specific depreciation and amortisation. * Direct cash operating cost per ounce- measures the total direct cash cost attributable to producing an ounce. It reflects cash costs adjusted to exclude royalties and third party smelting and refining fees on an ounce basis.
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