22nd Oct 2010 07:00
AFRICAN BARRICK GOLD
LSE: ABG
Third Quarter Report for the three months ended 30 September 2010 22 October 2010
Based on IFRS and expressed in US Dollars
African Barrick Gold plc ("ABG'') reports third quarter results
â†' Net income of $40 million for the quarter and $139 million for the year to date
Financial Highlights
* Revenue down 1% to $209 million for the quarter and up 35% to $633 million year to date. * Average realised price for the quarter up 29% to $1,233 per ounce and up 27% to $1,180 per ounce year to date. * Margin per ounce sold for the quarter (average realised price less cash costs) up 26% to $618 and up 46% to $624 year to date * EBITDA down 3% to $89 million for the quarter and up 58% to $286 million year to date. * Operational cash flow down 11% to $62 million for the quarter and up 158% to $220 million year to date. * Net income of $40 million, with EPS of 9.7 cents, down 8% for the quarter, and up 87% for the year to date to $139 million and 33.9 cents, respectively. * Net cash position of $344 million at 30 September 2010.
Operational Highlights
* Attributable production down 23% to 164,996 ounces for the quarter and up 4% to 521,204 ounces year to date. * Bulyanhulu and North Mara continued to deliver production in line with expectations. * Buzwagi production adversely impacted by approximately 10,000 ounces as a result of personnel suspensions following the fuel theft identified during the quarter. * Cash costs up 32% to $615 per ounce for the quarter and up 11% to $556 year to date, primarily due to additional costs at Buzwagi. * Encouraging progress on our portfolio of growth projects. * Continued investment in operational efficiency initiatives. African Barrick Gold Three months ended Nine months ended 30 30 30 30 September September % September September % 2010 2009 change 2010 2009 change (Unaudited) Gold production 164,996 213,819 -23% 521,204 502,717 4%(ounces) Gold sales (ounces) 164,687 212,054 -22% 522,786 485,762 8% Total cash costs ($/ 615 466 32% 556 500 11%ounce1) (in $ '000) Revenue 208,767 211,108 -1% 632,602 469,910 35% EBITDA2 89,263 91,854 -3% 285,516 180,878 58% Net profit 39,868 43,265 -8% 139,098 74,557 87%
attributable to owners Basic earnings per 9.7 10.6 -8% 33.9 18.2 87%share (EPS) (cents)
1 Total cash costs per ounce is a non-IFRS financial performance measure with no standard meaning under IFRS.
2 EBITDA is a non-IFRS financial performance measure with no standard meaning under IFRS.
Commenting on the results, CEO Greg Hawkins said: "Bulyanhulu and North Mara have continued to deliver a strong operating performance over the quarter, with stable production and good cost control. As recently announced, efforts at Buzwagi over recent months have continued to focus on the strengthening of expertise and resources, which has led to the identification of additional opportunities for improvement at the mine. We believe that these measures, in addition to those that we have already undertaken this year, will have a positive long-term impact on production and operations. However, as a result of the actions taken to address the onsite fuel theft that we uncovered during the third quarter, we now expect that group production for 2010 will be comparable to that of 2009 (716,000 ounces). Given the additional costs associated with the issues at Buzwagi over the quarter we now expect that cash costs for 2010 will be around the year to date figure of $556 per ounce. We view the lower production levels as temporary and the expected production for Buzwagi over the life of mine remains unchanged. Our portfolio of growth projects continues to show good progress, underpinning our confidence in our future production targets."
For further information, please visit our website: www.africanbarrickgold.com or contact:
African Barrick Gold plcGreg Hawkins, CEOKevin Jennings, CFO
Andrew Wray, Head of investor Relations & Corporate +44 (0) 207 129 7155 Devt.
Finsbury (Financial public relations firm) +44 (0) 207 251 3801 Andrew MitchellCharles ChichesterAbout ABG
ABG is headquartered in London and is listed on the Main Market of the London Stock Exchange under the symbol ABG. ABG is the largest gold producer in Tanzania and the fifth largest in Africa, growing from no production in 2000 to approximately 716,000 attributable ounces in 2009, with 16.8 million ounces of reserves. It has four producing mines, all located in northwest Tanzania, and seven principal exploration projects.
ABG has substantial gold mining experience and expertise, from exploration and development to mine construction and operation. It has modern, well-invested operations that have benefited from the experience, technology and high standards of its majority shareholder, Barrick Gold Corporation ("Barrick").
ABG's four mines are:
Bulyanhulu: an underground gold mine, which began production in April 2001;
Buzwagi: an open pit gold mine, which began production in May 2009;
North Mara: an open pit gold mine consisting of three open pit deposits, which
began production in April 2002; and Tulawaka: an open pit gold mine that has transitioned to an underground operation, which began production in June 2005.
ABG's recent exploration focus has been on advancing the exploration opportunities around its existing mines in order to increase the ABG's reserves and resources. Historically and prior to ABG's listing on the London Stock Exchange, the operations of ABG comprised the Tanzanian gold mining business of Barrick.
Conference call
There will be a conference call for analysts and investors on 22 October 2010 at 12.00 pm (noon) London time. The dial in details are as follows:
Participant dial in: +44 (0) 203 003 2666
Password: ABG
There will be a replay facility available until 29 October 2010. Access details are as follows:
Replay number: +44 (0) 208 196 1998
Replay PIN: 3849059#
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 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 Nine months ended 30 September 30 September (Unaudited) 2010 2009 2010 2009 Operating results Tonnes mined (thousands of tonnes) 10,606 9,625 30,222 26,478 Ore tonnes processed (thousands of 1,893 2,125 5,683 4,595tonnes) Recovery rate (percent) 86.2% 87.4% 85.9% 87.4% Average grade (grams per tonnes) 3.1 3.6 3.3 3.9 Attributable gold production 164,996 213,819 521,204 502,717(ounces) 1 Attributable gold sold (ounces) 1 164,687 212,054 522,786 485,762 Copper production (thousands of 1,920 1,609 5,858 4,706pounds) Cash cost per tonne milled ($) 55 48 53 55 Per ounce data ($) Average spot gold price2 1,227 960 1,178 931 Average realised gold price per 1,233 957 1,180 926ounce sold3 Total cash costs per ounce sold4 615 466 556 500 Amortisation and other per ounce 168 115 150 114sold5 Total production costs per ounce 783 581 706 614sold6 Margin 618 491 624 426 Financial results (in $ '000 and Unaudited) Revenue 208,767 211,108 632,602 469,910 Cost of sales (132,861) (127,991) (380,875) (310,601) Gross profit 75,906 83,117 251,727 159,309 Corporate (9,596) (8,170) (26,353) (27,804) administration Exploration (6,020) (4,226) (8,610) (6,989) and evaluation Other charges 937 (4,825) (12,286) (2,681) Profit before 61,227 65,896 204,478 121,835 net finance costs Finance income 318 17 1,028 62 Finance (606) (351) (1,329) (5,929) expense Net profit 60,939 65,562 204,177 115,968 before taxation Taxation (20,007) (19,582) (63,042) (34,763) expense Net profit for 40,932 45,980 141,135 81,205 the period Net profit attributable to 39,868 43,265 139,098 74,557 ABG shareholders Other financial information Three months ended Nine months ended 30 September 30 September (in $ '000 except per 2010 2009 2010 2009ounce and per share figures and Unaudited) Cash and cash equivalents 344,444 72,202 344,444 72,202 Cash generated from operating 62,171 69,507 219,836 85,147activities Capital expenditure7 60,567 35,357 147,063 161,499 EBITDA8 89,263 91,854 285,516 180,878 Basic earnings per share (cents) 9.72 10.55 33.92 18.18 Long term debt (Borrowings) - 1,406,777 - 1,406,777 Equity 2,462,942 671,451 2,462,942 671,451
1 Production and sold ounces reflect equity ounces which exclude 30% of Tulawaka's production base.
2 Reflects the London PM fix price.
3 Average realised price per ounce sold is a non-IFRS financial performance measure with no standard meaning under IFRS.
4 Total cash costs per ounce sold is a non-IFRS financial performance measure with no standard meaning under IFRS.
5 Represents equity amortisation expenses, inventory purchase accounting adjustments at ABG's producing mines divided by equity ounces of gold sold.
6 Total production costs per ounce sold is a non-IFRS financial performance measure with no standard meaning under IFRS.
7 Excludes acquisition of Tusker Gold Limited.
8 EBITDA is a non-IFRS financial performance measure with no standard meaning under IFRS
Operating update for the three months ended 30 September 2010
Attributable gold production for the quarter totalled 164,996 ounces, a 23% decrease compared to 213,819 ounces in the corresponding quarter of 2009. During the quarter both Bulyanhulu and North Mara continued to perform in line with expectations while production from Buzwagi was below plan. The decrease in production was primarily due to the impact of the actions taken to address the fuel theft at Buzwagi and the ongoing implementation there of operational improvements throughout the quarter, when compared to the higher production base at Buzwagi in the prior year period when the oxide cap was mined and processed. Further detail is contained in the mine site summary for Buzwagi.
Cash costs for the quarter were $615 per ounce sold, a 32% increase compared to $466 in the corresponding quarter of 2009. The increase was primarily due to lower production levels and specific ramp up costs incurred at Buzwagi. The cost increase was partially offset by cost reductions at Bulyanhulu, which were achieved by a combination of higher realised by-product revenue and lower direct mining and other costs. Costs at North Mara for the quarter were 13% lower compared to the prior year period due to the impact of capitalised costs on the direct mining costs.
Cash costs per tonne milled for the quarter increased 15% to $55 compared to $48 in the corresponding quarter of 2009. The increase was driven by the higher costs at Buzwagi which outweighed reductions at each of the other three mines.
Gold ounces sold for the quarter were 164,687 ounces, down 22% compared to 212,054 ounces in the corresponding quarter of 2009. The decrease was driven by a reduction of 46,093 ounces sold at Buzwagi. At the other mines, a small increase at Bulyanhulu in ounces sold over the quarter was offset by a reduction in ounces sold from Tulawaka.
Tonnes mined for the quarter were 10.6 million compared to 9.6 million in the corresponding quarter of 2009. The increase was driven primarily by North Mara's focus on waste stripping at the Gokona open pit, partially offset by the reduction in tonnes mined at Buzwagi.
Tonnes processed for the quarter were 1.9 million compared to 2.1 million in the corresponding quarter of 2009. The decrease was attributable to the reduction in throughput at Buzwagi due to the processing of transitional ore and reduced plant availability.
The average grade for the quarter was 3.1 grams per tonne which was 14% lower than the prior year period. The decrease was primarily due to the processing of low grade stockpiles at Buzwagi as a result of the fuel theft and the lower grade of the transitional ore that was processed when compared to the higher grade oxide material mined in the prior year period at Buzwagi, as well as the lower grade at Tulawaka compared to the prior year period.
Copper production for the quarter was 1.9 million pounds compared to 1.6 million pounds in the corresponding quarter of 2009. The increase was primarily due to additional copper production from Buzwagi.
Financial Results
Revenue for the quarter totalled $209 million compared to $211 million for the corresponding quarter of 2009. This was the result of the decrease in ounces sold offset by the 29% increase in the average realised gold price to $1,233 per ounce during the third quarter 2010.
Cash margins per ounce of gold sold, being the average realised price per ounce less average cash cost per ounce sold, increased to $618 per ounce during the quarter. This represents a 26% increase from $491 per ounce for the corresponding quarter of 2009.
EBITDA for the quarter was $89 million compared to $92 million in the corresponding quarter of 2009. Our resulting attributable net income for the quarter was $40 million compared to $43 million in the corresponding quarter of 2009. This represented an EPS for ABG of 9.7 cents compared to 10.6 cents for the corresponding quarter of 2009.
Capital expenditure incurred for the quarter amounted to $61 million compared to $35 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 waste stripping at the Gokona open pit, the water treatment plant and the TSF expansion at North Mara, the Bulyanhulu underground mine development and infrastructure development and the Tulawaka life of mine extension.
Cash flow generated from operations was $62 million for the quarter and net cash was $344 million at the end of the quarter. In addition, we are currently progressing negotiations for the provision of a syndicated credit facility to replace the $100 million facility put in place with Barrick at the time of the IPO. As such, we expect to continue to have significant financial flexibility to pursue our strategy of achieving growth from our existing asset base whilst assessing potential acquisition targets throughout Africa.
Exploration and Corporate Development 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 Nyanzaga (Tusker and Kilimani). Good progress has been made on all projects:
* The Golden Ridge Project feasibility study, continued throughout the quarter. Results from reverse circulation infill resource drilling and from drill holes completed for metallurgical test work were received during the quarter. A resource model incorporating the infill drilling and results of the metallurgical test-work is expected to be announced by year-end, and the feasibility study is on track for completion in early 2011. * At North Mara, we made significant progress on the drill program targeting the underground potential at the Gokona deposit. The current near-mine exploration program is focused on delineating high grade shoots between the Gokona West and Gokona East Deeps lodes, and extending mineralisation at depth. The feasibility study to assess the Gokona-Nyabigena underground potential commenced, on schedule, at the end of July 2010 with completion targeted for early-mid 2011. * At Tulawaka East Zone Underground, exploration drilling continued to extend the known high-grade mineralised shoots below the previously defined Level 7 resource, indicating potential to further extend the mine life. At the same time, updated resource modelling on the Main West Zone and Mojamoja prospects is being completed to assess the near surface and open pit potential of resources within trucking distance to the Tulawaka plant. * At the Bulyanhulu Upper East Zone, the feasibility study is underway with completion targeted for early 2011. * At the Nyanzaga Project infill and step-out drilling commenced on the Tusker deposit. Planning to test satellite targets is now well underway. The focus of the current program is to delineate extensions to known mineralisation at the Tusker and Kilimani resource areas and to identify additional satellite resource areas within 15km of the Tusker deposit. Drilling completed to date has been mainly infill drilling on the northern end of the Tusker resource, and assays received during the quarter confirmed continuity of mineralisation. * Drill programs also commenced at Bulyanhulu (Reef 2 West), Buzwagi (Village Reef) and Masabi projects, and along strike from the Gokona and Nyabigena open pit deposits within the "Gokona Corridor".
Golden Ridge
We are progressing the feasibility study on the Golden Ridge Project to truck Golden Ridge ore approximately 50km to our Buzwagi operation. The Golden Ridge feasibility study is scheduled for completion in early 2011 and we expect to be in a position to release a resource for Golden Ridge by year-end 2010. The Exploration group completed infill reverse circulation (`'RC'') drilling and metallurgical test-work diamond drilling (`'DD'') late in the first half of 2010. Assays have now been received for all the RC and DD holes and assessment of the results is ongoing, however, significant intersections confirmed the width and tenor of mineralisation in the Main Zone, and potentially expanded the resource area in the southern pit area. Significant results from infill drilling include:
Significant results from DD holes included:
* GRRCDDM0004 - 13m @ 5.09g/t Au from 81m * GRRCDDM0005 - 7.2m @ 6.58g/t Au from 141.8m & 9m @ 11.7g/t Au from 155m * GRRCDDM0006 - 27.1m @ 8.00g/t from 86.9m * GRRCDDM0009 - 7m @ 9.44g/t Au from 92m & 9.7m @ 7.06g/t Au from 102.3m * GRDDM0013 - 15m @ 2.85g/t Au from 24m * GRDDM0014 - 7m @ 4.16g/t Au from 12m & 9.1m @ 6.75g/t Au from 56m
Significant results from RC infill drilling on the southern pit included:
* GRRC0405 - 16m @ 2.20g/t Au from 23m * GRRC0417 - 17m @ 3.15g/t Au from 70m * GRRC0418 - 3m @ 17.12g/t Au from 93m * GRRC0419 - 8m @ 3.30g/t Au from 17m & 4m @ 12.4g/t Au from 33m * GRRC0424 - 14m @ 2.33g/t Au from 50m
Forty composite samples of 25kg each have been submitted to AMMTEC for metallurgical test work. Results are anticipated by the end of October 2010.
[For picture see www.africanbarrickgold.com]
Golden Ridge Long Section looking west showing the main pit outline and metallurgical drilling 2010
Based on the results of the 2010 drilling and the current modelling of the Golden Ridge mineralisation there is potential to increase resources at Golden Ridge further, both adjacent to and below the current $750/ounce pit design. Additional infill and step out drilling is both warranted and required between the main and southern pit resource areas, along strike to the north, and at depth targeting higher-grade shoots.
North Mara
At North Mara, the focus throughout the quarter has been on drill testing for extensions of higher-grade lodes at depth beneath the Gokona and Nyabigena open pits and scout RC drilling along strike to the southeast of Nyabigena open pit and northwest of the Gokona open pit along the "Gokona Corridor".
Gokona Underground Extensions
In conjunction with the underground feasibility study, exploration drilling at North Mara is currently targeting further extensions to high-grade lodes amenable to underground mining below the planned Nyabigena and Gokona final-stage open pits. Significant progress was made on the Gokona underground drilling program with five holes completed, two holes in progress, and a further three holes pre-collared by the end of the quarter. All holes completed to date have intersected the mineralised host sequence volcanics and significant zones of alteration and veining. All assay results for this program were pending at the end of the quarter.
North Mara - Gokona Corridor
Reverse circulation scout drilling along the Gokona Corridor commenced during the quarter with 11 holes drilled for 4,409m. The Gokona Corridor represents approximately 15km of untested stratigraphy northwest of Gokona and southeast of Nyanbigena open pit deposits and the wide-spaced scout drilling is testing for favourable lithologies, alterations and gold anomalies that would warrant more detailed follow-up drilling. To date, several RC holes have intersected encouraging zones of alteration and veining, however, no assay results had been received by quarter-end.
[For picture see www.africanbarrickgold.com]
Gokona Deeps underground extension drill target area showing current drilling status at end of Q3 2010.
Tulawaka
East Zone Underground Extensions
During the quarter at the Tulawaka East Zone Underground 4,630m was achieved in 25 diamond drilled (DD) holes from the Level 7 Access drill drive. Drilling continued to focus on extensions to high grade shoots with Zones 250-500 below Levels 9 and 10. Quartz veining encountered in a number of the drill holes showed visible gold. Significant intersections included:
* 3m @ 62.2g/t Au and 5m @ 42.1g/t Au in hole TUDG00236 * 5.3m @ 69.7g/t Au in hole TUDG00245 * 2m @ 15.7g/t Au and 3m @ 20.2g/t Au in hole TUDG00246
It is anticipated that there will be an increase in resources between 20250E and 20500E within Zone 250, Zone 400 and Zone 550. Diamond drilling continues to test depth, plunge and strike extensions to the mineralised lodes throughout the East Zone and is currently focused on increasing reserves and resources for the year-end update. The underground diamond drill program is expected to continue throughout the rest of the year and into next year.
West Zone-Mojamoja
West Zone extension and infill drilling was completed during the quarter, in which eight holes were drilled for 1,027m. Significant intercepts include 3m @ 19.59g/t Au from 134m, 5m @ 1.93g/t Au from 68m and 5m @ 1.84g/t Au from 130m. Open pit optimisation studies are underway on West Zone and Mojamoja resource areas to delineate potential mineable ore within trucking distance of the Tulawaka plant.
BulyanhuluUpper East Zone
The feasibility study into the Upper East Zone area was awarded and commenced during the quarter. The objective remains to complete this study in early 2011 to assess the viability of mining the reserves in the zone earlier than anticipated in the current life of mine plan. In parallel to this, work has continued on dewatering the existing decline which accesses the zone.
Bulyanhulu Reef 2 West
Surface drill testing of the "Reef 2 West" target area commenced during the quarter with five RC holes completed and one in progress for a total of 1,566m. The program is primarily targeting a projected intersection between Reef 2 West and an inferred NNW - SSE trending structure. Little tested areas of Reef 2 West are also being tested as part of this program and will greatly assist in refining targets to be tested by underground diamond drilling, planned for 2011. Drilling to date has intersected Reef 2 stratigraphy and mineralised structures, which are currently being mined underground approximately 1km to the east. Assay results for three of the five holes completed to date have been returned with the best intersections being 2m @ 4.06g/t Au from 153m and 2m @ 6.64g/t Au from 297m in hole BGRC-063. Drilling continues on this phase of the program and an assessment of the potential of this extension area will be made at the completion of the program.
Greenfield Projects
Nyanzaga Project
Exploration drilling at the Nyanzaga project continued during the quarter with 25 RC and diamond drill holes completed for 10,920m. The current phase of exploration is focused on step-out and infill RC and diamond core drilling at the Tusker and Kilimani resource areas aimed at expanding the current resource base, improving the economic parameters (grade and strip ratio), and increasing the confidence of indicated and inferred resources. In conjunction with the resource drilling, a regional program of geochemical sampling and drilling will be undertaken to test several higher priority targets defined by previous geochemical and geophysical surveys.
Assay results for Tusker received during the quarter were predominantly for the initial infill drill holes on the northern end of the resource, and showed the continuity of the broad low grade system as interpreted. Intersections from the assays returned to date include:
* NYRCDD0138 - 79m @ 1.10g/t Au from surface
* NYRCDD0142 - 97m @ 1.65g/t Au from 6m
* NYRCDD0145 - 203m @ 1.52g/t Au from 140m including 39m @ 4.8g/t Au from
140m and
- 103.1m @ 1.44g/t Au from 473m including 13m @ 3.61g/t Au from 545m
* NYRCDD0147 - 103.1m @ 1.44g/t Au from 473m
* NYRCDD0151 - 88.85m @ 1.96g/t Au from 311m
* NYRC0172 - 100m @ 1.26g/t Au from surface
The assay results to date show that there is potential to prove up additional resources on the western limb of the Tusker antiform and on the north end of Tusker. Drilling will continue in the fourth quarter to focus on extending mineralisation on the northern, western and southern domains of the Tusker deposit.
Other developmentsCredit facility
Negotiations have continued throughout the quarter to replace the $100 million facility with Barrick with a syndicated credit facility with commercial lenders for an amount of $100-150 million. We expect to finalize this facility during the fourth quarter.
Indirect taxes update
As noted as part of our interim results update, the Tanzanian Government has adopted legislation, which reverses certain tax laws that conflicted with some of the provisions contained in our existing Mineral Development Agreements ("MDAs"). The new legislation should allow for the fiscal and tax terms of our MDAs, which provide for certain fuel excise levies and VAT exemptions, to be honoured. The new legislation represents a significant step in supporting the stability of the legal framework for the mining industry in Tanzania. The implementation of this legislation is ongoing and, as such, we are still accruing amounts on the relevant outstanding receivables. Over the quarter, accrued amounts equalled $14 million. We are also continuing our discussions with the relevant authorities as regards the repayment of the outstanding balance owed to us in respect of fuel excise levies and VAT payments previously made which we are reclaiming.
Senior management changes
As communicated on 10 September, Marco Zolezzi has been appointed as Chief Operating Officer of ABG. Marco brings with him over 30 years of experience in complex open pit and underground operations in Australia and South Africa. He has held a variety of operational, technical and project management roles, which we believe will add considerable value to ABG as we further develop our business. We have also recently confirmed the appointment of Katrina White as General Counsel and Company Secretary for ABG and, with this appointment, we have now finalised the senior management team at ABG. Katrina joins us from Barrick's Australia Pacific region where she has held the role of Regional General Counsel for the past five years. Katrina replaces Cassie Boggs who has been ABG's Acting General Counsel and Company Secretary, who returns to Barrick. We thank Cassie for the assistance and contribution she has made to the team during her time with us.
Outlook
Our focus remains on delivering a stable production level from our existing asset base while implementing further operational efficiencies to achieve targeted cost levels. So far in 2010, we have been encouraged by the consistency of the performance at Bulyanhulu and North Mara, our two longest established assets.
At Buzwagi, we believe that the operational initiatives we are undertaking together with the additional measures to optimize the long-term efficiency of the operation should have a positive long-term impact on operations and production, despite any short-term negative effects that they may have. As a result of the delay to the mining of higher grade ore zones in Stage 1, caused by the onsite fuel theft that we uncovered during the third quarter which will reduce full year production at Buzwagi by approximately 30,000 ounces, we now expect that group production for 2010 will be comparable to that of 2009 (716,000 ounces). Given the additional costs associated with the issues at Buzwagi over the quarter we now expect that cash costs for 2010 will be around the year to date figure of $556 per ounce, compared to the guidance range of $500-550 per ounce. We view the lower production levels as temporary and the expected production for Buzwagi over the life of mine remains unchanged.
Mine site summaryBulyanhulu Three months ended Nine months ended (in $ '000) 30 September 30 September (Unaudited) 2010 2009 2010 2009 Underground ore tonnes Kt 213 262 683 705hoisted Ore milled Kt 205 249 682 691 Head grade g/t 9.7 8.0 9.4 8.6 Mill recovery % 93.2% 92.0% 92.4% 92.2% Ounces produced oz 59,398 58,988 191,254 176,854 Ounces sold oz 55,673 54,167 177,657 181,710 Cash costs/ounces sold $/oz 551 698 544 644 Cash cost per tonne $/t 150 152 142 169milled Capital expenditure $(000) 24,338 15,013 57,127 35,304
Gold production at Bulyanhulu for the quarter was 59,398 ounces which was in line with the prior year period. During the quarter the head grade improved as a result of improved dilution control, the positive impact of which was offset by the decreased tonnes hoisted and reduced mill throughput. The reduction in tonnes mined was the result of a shaft hoist winder failure in July, which impacted gold production by approximately 4,000 ounces.
Cash costs for the quarter were $551 per ounce sold which was 21% lower than the prior year period of $698. The decrease over the quarter was as a result of increased by-product revenue, less tonnes milled for the same ounce production, and lower direct mining costs. The direct mining cost decrease was primarily attributable to improved cost management in the areas of maintenance and consumables.
Gold ounces sold for the quarter were 55,673 which was lower than the production of 59,398 ounces. The difference was due to shipping delays on the sale of concentrate. Management expects to recover the difference accumulated during the quarter and the year to date over the fourth quarter.
Capital expenditure for the quarter was $24.3 million compared to $15.0 million in the prior year period. The increase during the quarter was predominantly driven by investments in underground mine infrastructure, such as the refrigeration plant and mobile mining equipment.
Mine site summaryNorth Mara Three months ended Nine months ended (in $ '000) 30 September 30 September (Unaudited) 2010 2009 2010 2009 Tonnes mined Kt 5,493 3,341 15,137 11,257 Ore tonnes mined Kt 567 1,041 2,014 3,779 Ore milled Kt 757 633 2,095 1,961 Head grade g/t 2.6 2.9 2.9 3.0 Mill recovery % 81.4% 76.6% 82.3% 79.0% Ounces produced oz 52,443 45,891 157,974 151,008 Ounces sold oz 53,328 47,426 161,384 152,310 Cash costs/ounces sold $/oz 472 544 476 485 Cash cost per tonne $/t 33 41 37 38milled Capital expenditure $(000) 23,254 6,803 59,936 20,076
Gold production for the quarter at North Mara was 52,443 ounces, compared to the prior year period figure of 45,891 ounces. The increase over the quarter was due to increased throughput from ore stockpiled in 2009. The focus in the current quarter was on waste stripping in the Gokona pit which reduced the ore tonnes mined. The improved recoveries in the process plant resulted from the plant optimization project and a blend of ore feed conducive to better mill recovery.
Cash costs for the quarter were $472 per ounce sold compared to $544 in the prior year period. The decrease during the quarter was primarily driven by increased gold production and tonnes mined over a similar cost base with some cost improvements derived from lower labour and administrative expenses.
Gold ounces sold for the quarter were 53,328 ounces which were in line with production of 52,443 ounces.
Capital expenditure for the quarter amounted to $23.3 million compared to $6.8 million in the prior year period. The increase over the quarter was predominantly driven by the Gokona waste stripping investment, which amounted to $10.4 million. Sustaining capital during the quarter was $12.8 million, with key ongoing projects including the water treatment plant and the expansion of the tailings storage facility.
Mine site summaryBuzwagi Three months ended Nine months ended (in $ '000) 30 September 30 September (Unaudited) 2010 2009 2010 2009 Tonnes mined Kt 4,872 5,996 14,338 14,444 Ore tonnes mined Kt 845 1,717 3,118 3,773 Ore milled Kt 842 1,161 2,649 1,715 Head grade g/t 1.9 2.6 2.1 2.5 Mill recovery % 82.0% 89.5% 80.8% 89.6% Ounces produced oz 42,204 88,297 141,762 122,674 Ounces sold oz 44,792 90,607 152,515 101,596 Cash costs/ounces sold $/oz 834 301 630 323 Cash cost per tonne $/t 44 23 36 19milled Capital expenditure $(000) 9,126 12,138 17,140 103,343
Gold production at Buzwagi for the quarter was 42,204 ounces compared to 88,297 ounces in the prior year period. As highlighted in the interim results statement, production at Buzwagi during the first half of 2010 was adversely impacted by longer than expected mining and processing of the transitional ore, which led to lower throughput and recoveries, as well as a series of unscheduled power outages and incidents of equipment failure. Efforts over recent months have continued to focus on the investment in expertise and resources to address these issues.
Over the course of the third quarter, management identified further opportunities for improvement at the mine, which are being undertaken. The implementation of these additional measures has affected day-to-day operations at Buzwagi, particularly in terms of plant availability and throughput. However, management believes that these measures should have a positive long-term impact on production and operations, despite any short-term negative effects that they may have. All of the measures taken remain on track to achieve budgeted production run rates by the end of the year.
In addition to this, we have recently discovered an organised and systematic onsite fuel theft, which has impacted production at Buzwagi. Investigations conducted during the third quarter into this matter indicated that criminal fuel theft syndicates had widely infiltrated our mining department. To address this, we suspended around 60 employees and a number of contractors, representing in total over 40% of our mining department, pending further disciplinary procedures. As a result, the mining of higher grade ore has been delayed and low grade stockpiles have been processed. This led to a reduction of 10,000 ounces of production over the quarter. Management initially expected to recover this production over the remainder of the year. However, the timeframe to bring in replacement operators was longer than initially expected. Approximately 20 operators have now been seconded from Barrick to assist in restoring mining operations to planned levels and to train new operators. Overall, we estimate that the delay caused by this incident to the mining of higher grade ore zones in Stage 1 will reduce full year production at Buzwagi by approximately 30,000 ounces. Despite the short-term impact on production, these actions were necessary to maintain the integrity of the operating environment at Buzwagi. We are currently implementing a number of measures to strengthen existing fuel management procedures.
Cash costs for the quarter were $834 per ounce sold compared to the prior year period of $301 per ounce sold. During the quarter, cash costs were impacted by the lower production base, higher maintenance, contracted services and administrative costs as a result of the operational initiatives highlighted above and the actions taken in response to the fuel theft.
Gold ounces sold for the quarter were 44,792 ounces which was slightly higher than the production of 42,204 ounces.
Capital expenditure for the quarter was $9.1 million compared to $12.1 million in the corresponding period in 2009. Capital investment so far in 2010 has been primarily focused on mining equipment.
In terms of our ongoing operating initiatives, actions to date have concentrated on three key areas:
Process plant
A detailed strategic review of the process plant has been carried out because of the issues experienced in processing transitional ore during the first half of 2010. This review has confirmed the design integrity of the plant and also served as an opportunity to take additional steps with a view to maximising future performance. Steps include the redesigning of the pebble ports to enable higher throughput levels, an upgrade and recommissioning of the sulphur plant and a complete process review aimed at optimising the flotation plant in order to increase copper contained in the concentrate. In taking these steps, we seek to ensure that the plant meets its longer-term throughput capacity and recoveries.
Mine
The pit scheduling has been assessed and revised following changes to the equipment availability expectations. To complement and enhance the steps taken so far this year, we intend to expand our mobile fleet further in 2011 to increase capacity for key task-specific support, such as haulage requirements for the tailings storage facility lift and dedicated dozer facilities for the stockpiles and overburden movement. This will help ensure optimal availability for the open pit mining operations. We have also conducted a full review of the drill and blast program, which has led to a number of improvements, aimed at increasing blasting effectiveness.
Geology
Efforts in this area have focused on grade control drilling to de-bottleneck the open pit drill, blast and mucking cycle. Further, as a result of the higher grind index experienced in the ore processed so far this year, an additional rock hardness mapping and sampling program has been implemented, allowing us to collate and analyse key data.
Mine site summaryTulawaka (reflected as Three months ended Nine months ended 70%) (in$ '000) 30 September 30 September (Unaudited) 2010 2009 2010 2009 Underground ore tonnes Kt 28 27 64 72hoisted Ore milled Kt 89 81 258 228 Head grade g/t 4.1 8.5 3.9 7.6 Mill recovery % 93.1 94.2% 93.2% 94.0% Ounces produced oz 10,952 20,643 30,213 52,180 Ounces sold oz 10,895 19,854 31,229 50,145 Cash costs/ounces sold $/oz 749 397 678 385 Cash cost per tonne $/t 92 98 82 85milled Capital expenditure $(000) 5,336 1,425 10,725 2,795(100%)
Attributable gold production at Tulawaka for the quarter was 10,952 ounces compared to the prior year period of 20,643 ounces. The lower gold production during the quarter compared to the prior year period was a result of mining very high grade underground ore in the 2009 quarter.
Cash costs for the quarter were $749 per ounce sold compared to $397 in the prior year period. The increase was mainly due to the lower production base compared to the corresponding quarter in 2009.
Gold ounces sold were in line with production for the quarter.
Capital expenditure for the quarter totalled $5.3 million compared to $1.4 million in the prior year period. During the quarter Tulawaka has continued to focus on an aggressive exploration drilling program for both the underground and open pit resources in order to extend its mine life beyond 2011. This program has been supported by investment in additional mining equipment to increase exploration development and to support mine life extension.
Basis of preparation
The financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. Barrick, ABG's majority shareholder, reports under US GAAP. Due to the differences in the basis of accounting there may be significant differences in the reported numbers of each entity.
ABG was not constituted as a separate legal group prior to 22 February 2010. The combined historical financial information prepared specifically for the purposes of this report is prepared on a basis that combines the results and assets and liabilities of each of the companies constituting the ABG group by applying the principles underlying the consolidation procedures of IAS 27 (revised) `Consolidation and Separate Financial Statements' ("IAS 27R") to each of the periods ending 30 September 2010 and 30 September 2009. On such a basis the combined historical financial information sets out the ABG group's financial position as at 30 September 2009 and results of operations and cash flows for the three and nine month periods then ended and the nine months ended 30 September 2010.
IFRS as adopted by the EU does not provide for the preparation of combined historical financial information. Accordingly, in preparing the combined historical financial information for this report certain accounting conventions commonly used for the preparation of historical financial information for inclusion in investment circulars as described in the Annexure to SIR 2000 (Investment Reporting Standard applicable to public reporting engagements on historical financial information) issued by the UK Auditing Practices Board have been applied. The application of these conventions results in the following material departures from IFRS. In all other respects IFRS has been applied.
- As explained above, the historical financial information contained in this report is prepared on a combined basis and therefore does not comply with the requirements of IAS 27R. The historical financial information has therefore been prepared on a combined basis applying the principles underlying the consolidation procedures of IAS 27R.
- The combined historical financial information does not constitute a set of general purpose financial statements under paragraph 3 of IAS 1 `Presentation of Financial Statements' ("IAS1") and consequently ABG does not make an explicit and unreserved statement of compliance with IFRS as contemplated by paragraph 14 of IAS 1. A company is only permitted to apply the first time adoption rules of IFRS 1 `First time Adoption of International Financial Reporting Standards' ("IFRS1") in its first set of financial statements where such an unreserved statement of compliance has been made. Although such a statement has not been made, the combined historical financial information has been prepared as if the date of transition to IFRS is 1 January 2007, the beginning of the first period presented, and the requirements of IFRS 1 have been applied as of that date.
Non-IFRS financial measures
ABG has identified certain non-IFRS financial measures in this report. Non-IFRS financial measures disclosed by management in this report are provided as additional information to investors in order to provide them with an alternative method for assessing ABG's financial performance 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 price per ounce sold is a non-IFRS financial measure which excludes from sales:
-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
EBITDA is a non-IFRS financial measure. ABG calculates EBITDA as net profit or loss for the period excluding:
- Income tax expense;- Interest expense;- Interest income; and
- Depreciation and amortisation (including impairment).
EBITDA is intended to provide additional information to investors and analysts, and does not have any standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA differently.
Total 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. 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.
Total production costs per ounce sold is a non-IFRS financial measure which includes the following: Costs absorbed into inventory as well as royalties, by- product credits and production taxes, Inventory purchase accounting adjustment, unrealized gains and losses from non hedge currency and commodity contracts and amortization costs
Mining statistical information
The following discussion 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.
vendorRelated Shares:
ACA.L