10th May 2012 07:00
10 May 2012
African Barrick Gold plc (the "Company" or "ABG")
Board Approval for Bulyanhulu Process Plant Expansion
* Demonstrates delivery on organic growth * Adds over 40,000 ounces of gold per annum for first six years of project * Low cost additional production from tailings retreatment * Construction to begin H2 2012 with first gold production in H1 2014 * Creates significant further growth possibilities at Bulyanhulu
ABG is pleased to announce that it has received Board approval to proceed with the construction of a new Carbon in Leach ("CIL") circuit at the process plant at Bulyanhulu. The project will add production in excess of 40,000 ounces ("Koz") of gold per annum for the first six years of the project from H1 2014 and further incremental production for the remainder of the life of mine ("LOM"). This is an important step in the development of Bulyanhulu and significantly increases our optionality as we look at further increasing production from the mine.
Commenting on the project, CEO Greg Hawkins said: "As we move through 2012, we are now seeing the results from two years of investment in our portfolio of high quality assets. We have extended the life of Tulawaka, announced a 4.6Moz resource at Nyanzaga and we are now advancing the first of an expected series of brownfield projects. This low risk brownfield project adds near term production at our flagship mine and provides significant flexibility as we look to further grow the production base of this world class asset"
The decision to commit to the low risk brownfield development follows the successful conclusion to a feasibility study into the construction of a new 2.4 million tonnes per annum ("Mtpa") CIL circuit which will process both historic tailings from the tailings storage facility ("TSF") and current tailings from the flotation circuit.
[Please refer to www.africanbarrickgold.com for picture]
The expansion will generate additional LOM production of 576Koz at a total cash cost of $554 per ounce. Over the first six years of the project, as we process historic tailings from the TSF, production will average in excess of 40Koz per annum at a total cash cost of around $500 per ounce. For the remainder of the mine life of Bulyanhulu, additional rougher tailings will be processed which will deliver an average of 10Koz per annum at a total cash cost of around $600 per ounce. Pre-production capital investment for the project is estimated at $167 million, inclusive of contingency, and LOM sustaining capital at $18 million. This generates a pre-tax IRR of 17.1% using our current gold resource price of $1,400 per ounce. The new CIL plant replaces a smaller existing CIL plant helping to lower operating costs and improve recoveries whilst enhancing the existing processing plant logistics.
The project creates significant additional upside potential at Bulyanhulu by providing greater flexibility and the capacity to process potential additional ore from the incorporation of surface mining into the mine plan and increased underground mining rates, as well as potential toll processing of ore from satellite deposits. This represents the first stage in stepping up the production levels at Bulyanhulu to take advantage of the significant reserve and resource base at the asset. Together with other growth projects we are pursuing at Bulyanhulu this will help to build on the production profile at the mine over the coming years.
Following the Board's approval of the project, procurement of long lead items is a priority, with commencement of site works anticipated by the end of July 2012. Construction of the plant and associated infrastructure, together with commissioning, is expected to take up to 18 months, with first gold production expected in H1 2014. The pre-production capital costs for the project will be split approximately 30% in 2012 and 70% in 2013 and we are in the process of assessing funding options for the expansion.
Background to the project:
From the commissioning of Bulyanhulu in 2001 until 2007, flotation circuit tailings from the process plant were pumped to the TSF and a small fraction utilised for underground paste backfilling purposes. In 2007, a 0.3Mtpa CIL circuit was commissioned which processes the cleaner flotation circuit tailings, approximately 25% of mill feed tonnage, but containing approximately 50% of the gold in the total tailings stream. The rougher tailings along with the CIL tails have historically been pumped to the TSF.
Current process flow:
[Please refer to www.africanbarrickgold.com for chart]
The construction of a new 2.4Mtpa CIL circuit will allow for the hydraulic reclamation of the current TSF facility and the simultaneous treatment of all of the current flotation tailings through a purpose built processing plant. The existing 0.3Mtpa plant will be decommissioned following the start-up of the new plant providing continuous processing capability throughout the construction process. The plant feed for the first six years will be made up of the historical material reclaimed from the TSF and from both clean and rough tailings generated from the existing flotation plant. Once the TSF is exhausted the plant will run from the flotation circuit tailings, supplemented by lower grade rougher tailings stockpiles (approximately 1.9Mt at a grade of 0.65g/t), which will be created in advance of the expansion. A new LOM TSF will be constructed for the future tailings at Bulyanhulu which requires an Environmental and Social Impact Assessment, but does not impact on the project timetable.
Future process flow:
[Please refer to www.africanbarrickgold.com for chart]
Key Life of Mine operating metrics:
Operating Metrics Additional Tonnes Processed 29.9Mt Feed Grade 0.93g/t Recovery 64.1% Additional Ounces 576Koz Operating Cost Per Tonne $10.67 Total Cash Cost Per Ounce $554
For the first six years of operation of the new plant the feed grade of the incremental material treated will be higher at 1.00g/t which will also increase recoveries to just over 65%. For the remainder of the mine life the incremental feed will be comprised solely of the lower grade rougher tailings with recoveries above 60%.
Breakdown of Capital Expenditure:
Capital Expenditure $m Processing Plant and Infrastructure 63 Contractors 22 Owner and Indirect Costs 36 Provisions 28 Contingency 18 Total Pre-Production Capital 167 LOM Sustaining Capital 18 Total Capital Expenditure 185 Sensitivity Analysis:The sensitivity analysis below highlights the returns the project offers at arange of gold prices using the base case scenario without any upside potentialfactored into the mine plan.Gold price $/oz 1,200 1,400 1,600 1,800 Pre-tax IRR % 11.1% 17.1% 22.9% 28.5%
Tailings Storage Facility Resource:
In order to delineate the TSF resource a total of 209 drill holes were drilled for a total of 2,456 metres. From this 1,626 samples were collected at regular 1.5 metre intervals, with further samples taken from three, 2 metre deep trenches. Fire assays were undertaken for all samples with gold values less than 5g/t and screen fire assays were undertaken for samples greater than 5g/t. These sample details were entered into the surface drill database, with the validated data being used for the resource modelling. As a result of the drilling programme, we have been able to declare an Indicated resource of 8.0Mt at 1.23g/t for 315Koz from the TSF, which underpins the expansion project.
The following table details the TSF Mineral Resources, which have been developed and are reported in accordance with Canadian National Instrument 43-101.
TSF Mineral Resource Estimate (December 2011)
Tonnes Gold g/t oz Indicated 7,974,020 1.229 315,080 Total 7,974,020 1.229 315,080
(1) See `Note to mineral resource estimates' at the end of this release for information on the calculation of mineral resources estimates and definitions.
Project Timelines:Project Execution timetable Long lead items ordered H1 2012 Construction commences H2 2012 Plant commissioning commences H2 2013 First Production H1 2014Conference call details:
A conference call will be held for analysts and investors on 10th May at 9:00am London time with the dial in details below. A short presentation on the process plant expansion project will be available on our website ahead of the call: www.africanbarrickgold.com
Participant dial-in numbers: +44 (0) 20 3003 2666 (UK) / 1 866 966 5335 (US)
Password: ABG
Replay dial-in number: +44 (0) 20 8196 1998 (UK) / 1 866 583 1035 (US toll free)
Access pin: 5360458ENQUIRIES
For further information contact:
African Barrick Gold plc +44 (0)20 7129 7150
Andrew Wray, Head of Corporate Development & Investor Relations
Giles Blackham, Investor Relations Manager
RLM Finsbury +44 (0)20 7251 3801 Charles 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 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 in accordance with IFRS as adopted by the European Union, unless otherwise stated in this report.
Note to mineral resource estimates
Mineral resources estimates contained in this announcement have been calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definitions were followed for the mineral resources estimates. Calculations have been reviewed, verified (including estimation methodology, sampling, analytical and test data) and compiled by ABG personnel under the supervision of ABG Qualified Person: Richard Adofo, Corporate Manager, Geology. However, the figures stated are estimates and no assurances can be given that the indicated quantities of metal will be produced. Mineral Resources have been calculated using an assumed long-term average gold price of US$ 1400 per ounce. Resource estimates can change and tend to be influenced mostly by new information pertaining to the understanding of the deposit and secondly the conversion to ore reserves. In addition, estimates of inferred mineral resources may not form the basis of an economic analysis and it cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Therefore, investors are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally mined, or that it will ever be upgraded to a higher category. Likewise, investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be upgraded into mineral reserves.
An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
Forward-looking statements
This announcement is for information purposes only and does not constitute an invitation or offer to underwrite, subscribe for or otherwise acquire or dispose of any securities of ABG in any jurisdiction.
This announcement 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, many of which are beyond the control of ABG, which could cause actual results and developments to differ materially from those expressed in, or implied by, the forward-looking statements. Factors that could cause or contribute to differences between the actual results, performance and achievements of ABG include, but are not limited to, political, economic and business conditions, industry trends, competition, fluctuations in the spot and forward price of gold or certain other commodity prices, changes in regulation, currency fluctuations (including the US dollar, South African rand and Tanzanian shilling exchange rates), ABG's ability to successfully integrate future acquisitions, 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. Although ABG's management believes that the expectations reflected in such forward-looking statements are reasonable, ABG cannot give assurances that such statements will prove to be correct. Accordingly, investors should not place reliance on forward looking statements in this announcement. Any forward-looking statements in this announcement only reflect information available at the time of preparation. 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 announcement that may occur due to any change in ABG's expectations or to reflect events or circumstances after the date of this announcement. Nothing in this announcement should be construed as a profit forecast or estimate.
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