19th Apr 2012 07:00
AFRICAN BARRICK GOLD
LSE: ABG
Results for the 3 months ended 31 March 2012 (Unaudited)
19 April 2012
Based on IFRS and expressed in US Dollars (US$)
African Barrick Gold plc ("ABG'') reports first quarter results
â†' Full year guidance maintained, results reflect expected lower grades
Financial Highlights
Revenue of US$268 million, in line with Q1 2011.
Cash margin2 of US$772 per ounce, an increase of 5% on Q1 2011.
The expected impact of lower production levels due to mine sequencing led to:
EBITDA2 of US$90 million, down 15% on Q1 2011.
Net income of US$35 million, with EPS of US8.6 cents, down 30% on Q1 2011.
Operational cash flow of US$56 million, a decrease of 36% on Q1 2011.
Net cash position of US$581 million as at 31 March 2012.
Operational Highlights
Attributable gold production1 of 144,643 ounces (Group production1 of 149,432 ounces), down 17% on Q1 2011 primarily as a result of the ongoing waste stripping at North Mara and reduced head grade at Buzwagi as planned.
Cash cost per ounce sold2 of US$925, an increase of 41% on Q1 2011, primarily due to the combination of a lower production base and increased energy costs.
Significant exploration success at Nyanzaga, with a total in-pit resource now in excess of 4.6 million ounces ("Moz").
Continued progress on our pipeline of organic growth projects.
Three months ended Year ended African Barrick Gold plc 31 March 31 December 2012 2011 % change 2011 (Unaudited)
Attributable Gold Production (ounces)1 144,643 173,907 -17% 688,278
Attributable Gold Sold (ounces)1 145,417 172,003 -15% 699,539 Attributable Cash cost ($/ounce)2 925 658 41% 692
Average realised gold price ($/ounce)2 1,697 1,392 22% 1,587
(in $'000) Revenue 267,537 266,627 0% 1,217,915 EBITDA 2 89,557 104,855 -15% 544,091
Cash generated from operating activities 55,526 86,684 -36% 498,323
Net profit attributable to owners 35,263 50,362 -30% 274,895
Basic earnings per share (EPS) (cents) 8.6 12.3 -30% 67.0
Operating cash flow per share (cents) 13.5 21.1 -36% 121.5
1 Group production and sold ounces consolidate 100% of Tulawaka's production base. Attributable production and sold ounces reflect equity ounces which exclude 30% of Tulawaka's production and sales base.
2 Cash costs per ounce sold, average realised price, EBITDA and cash margin are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to "Non-IFRS measures" on page 12 for the definitions of each measure.
Commenting on the results CEO Greg Hawkins said: "The first quarter's results reflect the expected mine sequencing for 2012 where we continue to anticipate a step up in production levels during the second half of the year. Our focus remains on the waste stripping programme at North Mara, ensuring that we manage the power situation in Tanzania and advancing our portfolio of growth projects, particularly Nyanzaga, which continues to produce exciting results. We remain on track to deliver against our guidance for the year and to continue enjoying strong leverage to the gold price."
For further information, please visit our website: www.africanbarrickgold.comor contact: +44 (0)207 129 African Barrick Gold plc 7150 Greg Hawkins, Chief Executive Officer Kevin Jennings, Chief Financial Officer Andrew Wray, Head of Corporate Development & Investor Relations +44 (0)20 7251 RLM Finsbury 3801 Charles Chichester About 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 Northwest Tanzania, and several exploration projects at various stages of development. We have a high-quality asset base, solid growth opportunities and a clear strategy.
The key pillars to our strategy are:
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 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 ("Barrick"), 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 19 April 2012 at 12.30 London time with the dial in details as follows:
Participant dial in: +44 (0) 203 003 2666 / +1 866 966 5335 Password: ABG There will be a replay facility available until 26 April 2012. Access detailsare as follows:Replay number: +44 (0) 208 196 1998 Replay PIN: 2936708# 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," "expect," "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 regulations, 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, risks 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) 2012 2011 2011 Operating results Tonnes mined (thousands of tonnes) 9,839 11,760 45,053 Ore tonnes mined (thousands of tonnes) 1,747 1,608 7,013
Ore tonnes processed (thousands of tonnes) 1,902 1,920 7,409
Process recovery rate (percent) 86.0% 87.2% 87.7% Head grade (grams per tonne) 2.8 3.2 3.3 Attributable gold production (ounces)¹ 144,643 173,907 688,278 Attributable gold sold (ounces)¹ 145,417 172,003 699,539 Copper production (thousands of pounds) 3,005 3,742 14,875 Copper sold (thousands of pounds) 2,516 3,734 15,069 Cash cost per tonne milled² 71 59 65 Per ounce data (US$/ ounce) Average spot gold price³ 1,691 1,386 1,572 Average realised gold price² 1,697 1,392 1,587 Cash cost² 925 658 692 Amortisation and other costs² 226 176 184 Total production costs² 1,151 834 876 Cash Margin² 772 734 895 Average realised copper price (US$/lb) 4.15 4.53 3.82 Three months ended Year ended 31 March 31 December (Unaudited) 2012 2011 2011 Financial results (in $'000) Revenue 267,537 266,627 1,217,915 Cost of sales (185,822) (168,152) (704,114) Gross profit 81,715 98,475 513,801 Corporate administration (15,155) (12,858) (50,505) Exploration and evaluation costs (6,515) (7,458) (30,339)
Corporate social responsibility expenditure5 (2,139) (730) (7,376)
Other charges5 (2,915) (3,940) (15,639) Profit before net finance cost 54,991 73,489 409,942 Finance income 266 372 1,484 Finance expense (2,311) (1,881) (8,725) Profit before taxation 52,946 71,980 402,701 Tax expense (16,506) (20,168) (117,924) Net profit 36,440 51,812 284,777 Attributed to: - Non-controlling interests 1,177 1,450 9,882 - Owners of the parent 35,263 50,362 274,895 Three months ended Year ended 31 March 31 December (Unaudited) 2012 2011 2011 Other Financial information (in $'000 except per share figures) Cash and cash equivalents 581,009 433,817 584,154 Cash generated from operating activities 55,526 86,684 498,323 Capital expenditure4 54,071 51,391 345,235 EBITDA² 89,557 104,855 544,091 Basic earnings per share (cents) 8.6 12.3 67.0 Operational cash flow per share (cents) 13.5 21.1 121.5 Equity 2,834,060 2,593,861 2,798,704
1 Production and sold ounces reflect equity ounces which exclude 30% of Tulawaka's production and sales base.
2 Cash cost per tonne milled, average realised gold price, cash cost per ounce sold, amortisation and other costs per ounce, total production cost per ounce, EBITDA and cash margin 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 Includes non-cash reclamation asset adjustments during the quarter.
5 Restated to separately disclose corporate social responsibility expenses on the face of the income statement.
Operating and financial review for the three months ended 31 March 2012
As communicated in the Preliminary results release in February, the grade profile for the first quarter of the year was lower than the previous quarter, as well as the corresponding quarter of 2011, driven predominantly by the expected fall at Buzwagi to its life of mine grade. This contributed to the 17% year-on-year decline in production to 144,643 ounces. We expect to see continuing lower grades during the second quarter, with a pick up in the second half of the year driven by North Mara.
A key operational focus for us during the quarter was the waste stripping programmes at both North Mara and Buzwagi in order to access higher grade areas in the second half of the year, predominantly at North Mara. Activities at North Mara continued to be constrained by the delay in receiving the final approval to utilise the newly constructed potentially acid forming ("PAF") waste rock dumps. The final permits for these dumps have been reviewed by NEMC, the Tanzanian environmental regulator, and are now awaiting formal sign off.
We also remained focused on our programmes to help mitigate the impact of the ongoing power instability in Tanzania. While the expanded back up capacity has helped alleviate some of the impact, the surges and drops in the voltage of the supply to our sites have resulted in additional maintenance and associated plant downtime leading to lower throughput and recoveries. This has been seen principally at Buzwagi and, as a result, the impact of lower grades has not been fully offset by the increase in throughput. Bulyanhulu has also been impacted, although to a lesser extent, and we are in the process of upgrading our back up capacity at the mine which we estimate will be completed during the third quarter.
Gold sales were marginally higher than production, and 15% lower than Q1 2011 due to the decrease in production.
Tonnes mined for the quarter were 9.8 million compared to 11.8 million in the corresponding quarter of 2011. The decrease was primarily driven by the constraints mentioned at North Mara and, to a lesser extent, by fleet availability at Buzwagi.
Tonnes processed of 1.9 million were in line with the prior year period, with the improved plant availability at Buzwagi offset by lower throughput at North Mara. Group recoveries were slightly lower at 86%, driven by the nature of the ore feed at Buzwagi where there was a higher proportion of talc ore.
Copper production for the quarter of 3.0 million pounds was 20% lower than the first quarter of 2011 as a result of the lower overall production at Buzwagi and Bulyanhulu, together with lower recoveries at Bulyanhulu.
Cash costs for the quarter were US$925 per ounce sold, compared to US$658 per ounce in the corresponding period of 2011. The increase was primarily due to the lower production base and lower resulting co-product revenue (approximately US$120 per ounce); increased usage and cost of energy, predominantly driven by diesel as a result of the need to self generate power (approximately US$80 per ounce); lower capitalised waste stripping at North Mara and year-on-year industry wide inflationary cost pressures. As volumes increase later in the year, we would expect to see a reduction in our per ounce cash costs as the volume impact reverses.
Cash cost per tonne milled increased from US$59 per tonne in Q1 2011 to US$71 per tonne in Q1 2012 mainly as a result of the increased costs outlined above.
Revenue was in line with the prior year as lower production and co-product revenues were offset by an increase in the realised gold price of US$1,697 per ounce sold for the quarter (compared to US$1,392 per ounce sold in the prior year).
EBITDA of US$89.6 million was 15% lower than the prior year period, due to the higher direct mining cost base combined with a lower production base and co-product revenue as well as increased corporate administration and corporate social responsibility costs.
Capital expenditure for the quarter amounted to US$54.1 million compared to US$51.4 million in Q1 2011. Key capital expenditures related to:
capitalised development: capitalised underground development at Bulyanhulu and Tulawaka (US$15.1 million), and capitalised waste stripping expenditure at North Mara and Buzwagi (US$10.4 million);
expansionary capital: capitalised exploration drilling at North Mara and Tulawaka (US$3.4 million), process plant and tailing facilities expansion at Bulyanhulu and Buzwagi (US$4.8 million) and investment in Tulawaka's mine life (US$1.7 million); and
sustaining capital: investments in mine infrastructure across all sites (US$6.6 million), business optimisation systems (US$3.6 million) and investments in mine equipment (US$2.2 million).
BulyanhuluKey statistics Three months ended Year ended Bulyanhulu 31 March 31 December (Unaudited) 2012 2011 2011 Underground ore tonnes hoisted Kt 250 267 1,048 Ore milled Kt 246 253 1,056 Head grade g/t 8.6 8.9 8.5 Mill recovery % 91.2% 91.8% 91.2% Ounces produced oz 61,836 66,265 262,034 Ounces sold oz 62,216 69,107 269,981 Cash cost/ounces sold $/oz 701 584 610 Cash cost per tonne milled $/t 177 159 156 Copper production Klbs 1,631 2,039 7,675 Copper sold Klbs 1,445 1,939 7,716 Capital expenditure $('000) 18,815 16,216 95,432 Operating performance
Gold production for the quarter was 61,836 ounces, 7% lower than the prior year mainly due to mine sequencing and the focus on lower grade areas with a view to accessing higher grade production areas in the second half of the year. The head grade for the quarter was 8.6 grams per tonne ("g/t") compared to the prior year period of 8.9g/t. Tonnes milled were marginally lower than the corresponding period in 2011.
Gold ounces sold for the quarter were 62,216 ounces, which was slightly higher than the production figure but 10% lower than Q1 2011 due to the lower production base.
Copper production for the quarter of 1.6 million pounds was 20% lower than that of the same period in 2011. This was mainly due to lower copper concentrate production and lower recoveries.
We have continued to invest in plant efficiencies during the quarter with the replacement of the regrind motor and further enhancement of the process plant and flotation circuit in order to increase recoveries and would expect to see the results from these enhancements from Q2 2012. As a result of the instability of power we have also undertaken increased maintenance and replacement of critical components during the quarter which has impacted plant availability and throughput.
Cash costs for the quarter of US$701 per ounce sold were 20% higher than the prior year period of US$584. This increase is attributable to the lower production base and co-product revenue; increased cost and usage of energy; and increased maintenance costs to address some of the plant operational efficiencies and impact of power outages. Cash costs per tonne milled increased to US$177 in Q1 2012 (US$159 in Q1 2011) as a result of the cost increases outlined above and slightly lower throughput.
Capital expenditure for the quarter of US$18.8 million was 16% higher than the prior year of US$16.2 million. The key areas of capital investments include:
capitalised development: capitalised underground development expenditure (US$12.7 million);
expansionary capital: expansion of the plant and tailings facilities (US$0.5 million); and
sustaining capital: business optimisations systems (US$1.2 million), miningequipment (US$1.1 million) and mine infrastructure enhancements (US$2.7million).BuzwagiKey statistics Three months ended Year ended Buzwagi 31 March 31 December (Unaudited) 2012 2011 2011 Tonnes mined Kt 4,903 5,326 21,534 Ore tonnes mined Kt 919 1,032 3,545 Ore milled Kt 928 841 2,993 Head grade g/t 1.5 2.4 2.3 Mill recovery % 82.4% 86.9% 88.0% Ounces produced oz 36,272 56,313 196,541 Ounces sold oz 33,321 54,101 200,518 Cash cost/ounces sold $/oz 1,103 667 691 Cash cost per tonne milled $/t 40 43 46 Copper production Klbs 1,374 1,703 7,201 Copper sold Klbs 1,071 1,795 7,353 Capital expenditure $('000) 13,067 2,984 83,203 Operating performance
Buzwagi is expected to operate close to its reserve grade of 1.5g/t in 2012 whilst continuing the waste stripping programme in the pit, principally to ensure the grade profile is maintained in future years. Although there was a 10% increase in tonnes milled against Q1 2011, the significantly lower grade meant that Buzwagi delivered gold production of 36,272 ounces, 36% lower than 56,313 ounces in Q1 2011. Gold ounces sold decreased by 38% to 33,321 ounces from 54,101 ounces, mainly as a result of the lower production.
Tonnes mined of 4.9 million were 8% lower than in Q1 2011, principally as a result of reduced excavator and haul truck availability due to the abrasive characteristics of the rock requiring increased maintenance and lower availability of certain spare parts.
Whilst milling activity increased 10% year on year, the process plant operated below nameplate capacity over the quarter, mainly as a result of a number of unplanned maintenance shutdowns due to the instability of the grid power supply. With full back-up power now installed at the mine, we have made use of a combination of grid power and diesel back-up during the quarter. Going forward, we intend to run solely on diesel power during the day and grid power at night in order to minimise disruptions and downtime. The plant downtime, together with the lower grades and higher component of talc ore, led to a reduction in recoveries to 82.4%.
Copper production for the quarter of 1.4 million pounds was 19% below the prior year production of 1.7 million pounds. This was mainly due to lower copper concentrate production as a result of a lower production base.
Cash costs for the quarter were US$1,103 per ounce sold compared to US$667 in Q1 2011. Cash costs have been negatively affected by the lower production base and co-product revenue; increased usage and cost of energy; and increased general administration costs largely due to increased logistic and warehousing costs. This was in part offset by the capitalisation of deferred stripping expenditure during the quarter and lower contracted services costs.
Cash costs per tonne milled decreased to US$40 in Q1 2012 from US$43 in Q1 2011. The increase in costs as explained above was offset by the increased tonnes milled.
Capital expenditure for the quarter was US$13.1 million compared to US$3.0 million in Q1 2011. Capital investment during the quarter consisted mainly of:
capitalised development: capitalised deferred stripping expenditure (US$6.1 million);
expansionary capital: expansion of the process plant and tailings facilities (US$4.3 million); and
sustaining capital: investment in mine infrastructure (US$1.3 million) and business optimisation systems (US$0.6 million).
North MaraKey statistics Three months ended Year ended North Mara 31 March 31 December (Unaudited) 2012 2011 2011 Tonnes mined Kt 4,391 6,136 21,808 Ore tonnes mined Kt 505 279 2,254 Waste Kt 3,886 5,857 19,554 Ore milled Kt 660 750 3,070 Head grade g/t 2.1 2.0 2.1 Mill recovery % 79.1% 78.7% 80.6% Ounces produced oz 35,361 37,599 170,832 Ounces sold oz 38,050 35,950 170,625 Cash cost/ounces sold $/oz 1,140 760 810 Cash cost per tonne milled $/t 66 36 45 Capital expenditure $('000) 13,836 27,675 123,146 Operating performance
North Mara continued to work on the waste stripping programme in order to open up higher grade zones for future quarters. As a result, mill feed during the quarter was supplemented by low grade stockpiles and together with lower throughput as a result of plant downtime, resulted in gold production being 35,361 ounces, down 6% from 37,599 ounces in Q1 2011. Gold ounces sold of 38,050 ounces exceeded production by 8%, and was also 6% higher than 2011 due to the sale of gold ounces on hand from Q4 2011.
Waste stripping activities in the quarter were constrained at the Gokona pit by waste dumping restrictions at the newly constructed PAF waste dumps due to permitting delays, together with land acquisition and relocation requirements surrounding the Nyabirama pit. The final permits approving the usage of the new PAF dumps have been reviewed by NEMC, the Tanzanian environmental regulator and now await final formal sign off.
While total tonnes mined fell by 28%, there was an increase of 81% in ore tonnes mined, predominantly from the Gokona pit, which helped the overall grade increase slightly to 2.1g/t.
Cash costs for the quarter were US$1,140 per ounce sold compared to US$760 in the prior year period. The majority of the increase was related to the lower capitalisation of waste stripping, along with increased labour and energy costs.
Cash costs per tonne milled increased to US$66 in 2012 from US$36 in Q1 2011, mainly as a result of the increased cost profile and lower throughput as a result of increased crusher and plant maintenance downtime.
Capital expenditure for the quarter totalled US$13.8 million, 50% lower than the US$27.7 million in the prior year. Key capital expenditure included:
capitalised development: capitalised waste stripping relating to the Gokona and Nyabirama pits (US$4.3 million);
expansion capital: capitalised drilling (US$2.6 million); and
sustaining capital: investment in mine infrastructure (US$2.6 million), business optimisation assets (US$1.8 million), mine equipment (US$1.1 million) and other capital items (US$1.1 million).
As well as the PAF permits, outstanding issues around the discharge of the environmental protection order ("EPO") are also actively being progressed with the relevant authorities. We believe that the PAF permitting sign off should be completed shortly and that the EPO discharge process will be completed during Q2 as previously communicated.
TulawakaKey statistics Three months ended Year ended Tulawaka (reflected as 70%) 31 March 31 December (Unaudited) 2012 2011 2011 Underground ore tonnes hoisted Kt 30 30 144 Open pit ore tonnes mined Kt 43 - 22 Open pit waste tonnes mined Kt 222 - 497 Ore milled Kt 67 77 291 Head grade g/t 5.4 5.9 6.6 Mill recovery % 95.4% 93.6% 95.1% Ounces produced oz 11,174 13,731 58,871 Ounces sold oz 11,830 12,845 58,415 Cash cost/ounces sold $/oz 902 738 727 Cash cost per tonne milled $/t 158 123 146 Capital expenditure (100%) $('000) 5,122 3,895 31,652
Operating performance
Attributable gold production at Tulawaka for the quarter was 11,174 ounces compared to the 13,731 ounces produced in Q1 2011. Higher grade ore from the underground mining area was blended with lower grade supplemental ore from the West pit extension, resulting in a marginal decrease in head grade. Gold ounces sold were broadly in line with production and down 8% on Q1 2011 reflecting the lower production.
Cash costs for the quarter were US$902 per ounce sold compared to US$738 in the prior year. This cost increase was mainly due to the increase in open pit mining activity which resulted in increased headcount, maintenance and contracted services as well as year-on-year inflationary increases. These were partially offset by increased capitalised mine development costs due to the higher underground mining cost base.
Cash costs per tonne milled increased to US$158 in the quarter from US$123 in Q1 2011, primarily as a result of the cost increases detailed above and lower throughput.
Having extended the mine life twice in 2011, we are also continuing our exploration drilling programmes and are aiming to be in a position later in the year to make a commitment to further mine life extensions. As a result of the mine life extensions and lack of availability of surface material, from Q2 2012 the process plant will begin to operate under a batch processing method. The reduction in throughput will see reduced production during the second quarter before an expected increase in the grade profile in H2 2012. Work will also continue through 2012 to construct a second underground portal to enable us to increase mining rates from the underground.
Capital expenditure for the quarter totalled US$5.1 million compared to US$3.9 million for the previous year. Key capital expenditure items included:
capitalised development: capitalised underground development (US$2.4 million);
expansion capital: expenditure incurred on the extension of the mine life (US$1.7 million) and capitalised exploration drilling (US$0.8 million).
Exploration and Development Update
Nyanzaga Project
We announced a significantly increased mineral resource for the Nyanzaga project in January 2012 of 4.1Moz of gold ("Au"), and activity in the quarter has focused on the modelling of the Kilimani near-surface resource, whilst field activities have focused on continuing geotechnical, hydrology and metallurgical drill programmes to allow us to better constrain the open pit model. As a result of the addition of the Kilimani resource we have been able to re-model the open pit resource, which has resulted in a larger, single pit incorporating both the Tusker and Kilimani resource areas. This has increased the in-pit resource by a further 0.5Moz and it is now in excess of 4.6Moz Au, consisting of 3.75Moz at 1.42g/t Au Indicated and 0.85Moz at 1.81g/t Au Inferred.
In addition, we continue to receive encouraging assay results for infill and step-out drilling completed in late 2011 and early 2012 that show excellent continuity from the broader spaced drilling. Recent results include intersections of:
NYZRCDD0506: 307m at 1.57g/t Au from 218m, including 3m at 64.7g/t Au from 441m.
NYZRCDD0509: 345m at 1.52g/t Au from 329m, including 15.96m at 5.39g/t Au from 532m.
NYZRCDD0510: 150m at 2.68g/t Au from 262m, including 13m at 20.2g/t Au from 392m and 135m at 2.60g/t Au from 448m, including 14m at 9.28g/t Au from 459m.
NYZRCDD0512: 244m at 1.28g/t Au from 244m and 159m at 2.06g/t Au from 515m, including 9m at 8.99g/t Au from 524m.
NYZRCDD0514: 102m at 1.82g/t Au from 343m, including 10m at 4.03g/t Au from 358m.
At Kilimani, the two hydrological holes drilled to date as part of the scoping study work have both returned significant results from shallow depths including intersections of:
NYZRCDDHY0006: 2m at 22.75g/t Au from 23m.
NYZRCDDHY0011: 24m at 1.32g/t Au from 4m.
North Mara
Gokona Expansion
We continue to assess the potential to undertake a further cutback in the Gokona pit as a result of the improvement in community relations which provides the potential to resite a public road which has so far constrained access. We aim to provide an update on this by Q3 2012 once we have analysed the impact of re-sequencing the current mine plan. Any change to this mine plan will deliver incremental ounces.
Gokona Underground
The first phase of a significant resource drill-out programme beneath the planned Gokona and Nyabigena open pits continued during the quarter and is scheduled for completion early in the second quarter of 2012. A revised underground resource is expected to be complete for mid-2012 and will be incorporated into an updated feasibility study on the underground which we expect to complete during H2 2012.
Infill drilling has continued to return positive assay results showing good continuity of mineralised zones encountered in broader spaced drilling. Several wide zones of high-grade gold mineralisation were also returned. As a result of the continued positive results, the current resource drill programme will be extended to target further resource additions.
Selected significant assay results received for the quarter include:
GKD334: 3m at 17.92g/t from 29m, 3m at 3.69g/t from 174m and 21m at 15.43g/t from 188m.
GKD336: 14m at 11.17g/t from 222m, 4m at 4.56g/t from 246m, 7m at 3.17g/t from 296m, and 4m at 3.55g/t from 336m.
GKD337: 7m at 31.02g/t Au from 457m and 11m at 8.24g/t from 467m.
GKD337W: 13m at 5.81g/t Au from 472m.
GKD338W: 5m at 5.58g/t Au from 326m and 3m at 24.93g/t Au from 363m.
GKD339: 6m at 4.26g/t Au from 186m, 5m at 8.59g/t Au from 206m, 5m at 3.41g/t Au from 219m and 2m at 13.69g/t Au from 227m.
GKD340: 11m at 8.20g/t Au from 211m (including 3m at 25.5g/t Au), 20m at 4.20g /t Au from 279m (including 4m at 11.6g/t Au) and 7m at 4.01g/t Au from 361m.
GKD342A: 2m at 5.54g/t from 566m and 5m at 6.49g/t from 668m.
Nyabirama Resource Definition and Extension Drilling
The Nyabirama programme is aimed at defining underground potential from areas previously not able to be drilled from the open pit or during early exploration drilling. The Nyabirama drill programme and resource modelling are expected to be complete for mid-year 2012, and the project will then be moved forward through scoping to assess the underground potential. Assay results received during the quarter continued to confirm the current resource interpretation, intersecting multiple narrow high grade zones in each hole.
Selected significant assay results during the quarter include:
NBD040: 3m at 143g/t Au from 99m and 6m at 5.20g/t Au from 208m.
NBD042: 2m at 14.1g/t from 84m, 5.60m at 2.63g/t from 122m and 5m at 3.41g/t from 211m.
NBD045: 1m at 57g/t Au from 167m and 22m at 4.41g/t Au from 217m.
NBD055: 4m at 4.49g/t from 103m, 2m at 6.67g/t from 189m and 3m at 10.85g/t from 305m.
NBD048: 4m at 76.3g/t from 93m, 3.6m at 12.0g/t from 440m and 3.9m at13.3g/t from 484m.
NBD052: 8m at 5.48g/t from 19m and 5m at 5.22g/t from 234m.
NBD061: 3m at 20g/t from 6m and 3m at 12.6g/t from 232m.
Tulawaka
East Zone Underground Extensions
The current programme is targeting high grade mineralised shoots within Zones 500-850 between Levels 11 and 15, below the current reserves. The drill results returned from the programme to date indicate that the mineralisation is exhibiting similar characteristics as in the upper levels.
Selected assay results for Tulawaka underground drilling during the quarterincluded:TUGD00427: 1.10m at 9.80g/t Au from 15m (including 0.5m at 15.6g/t Au from15.6m).TUGD00430: 2.20m at 13.7g/t Au from 32.6m (including 0.56m at 37.9g/t Au from32.6m).TUGD00437: 1.58m at 120g/t from 15.52m and 2m at 34.8g/t from 21m.TUGD00443: 0.85m at 680g/t from 15.75m.
These grades zones were intersected at the hanging wall between Levels 11 and 12 (550zone) which ties in well with the expected high grades at the Eastern portion of the deposit. The underground drill programme is expected to continue throughout 2012 targeting the Eastern areas of the underground which to date have had limited testing due to lack of drill drive access.
Bulyanhulu
Bulyanhulu Upper East
During the quarter, rehabilitation and dewatering work was completed on the decline to the Upper East Zone. At the same time, work on detailed execution design and execution procedures continued in advance of the commencement of the test stope which is scheduled to take place in Q3. Following completion of the test stope, Board approval will be sought to commence development of the zone. The planned eleven geotechnical and metallurgical test holes were completed with associated test work on the drill core underway.
Bulyanhulu Carbon in Leach ("CIL") Circuit Expansion
The feasibility study is complete for the construction of the new 2.4 million tonnes per annum CIL circuit at Bulyanhulu and we expect to release the results of the study in Q2, subject to Board approval. As well as delivering increased production, the expansion of the CIL circuit will give increased flexibility to the development of the mine as we look to increase the overall production profile over the coming years.
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.
Cash costs per ounce sold 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.
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 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.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for depreciation and amortisation and goodwill impairment charges.
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. 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.
Cash margin is a non-IFRS financial measure. The cash 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.
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 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.
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