23rd Jul 2012 07:00
AFRICAN BARRICK GOLD LSE: ABG 23 July 2012
Interim Results for the six months ended 30 June 2012 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
African Barrick Gold plc ("ABG'') reports half year results
â†' Continued progress, full year guidance maintained, dividend increased
Operational Highlights
Attributable gold production1 of 297,742 ounces (Group production1 of 305,692 ounces), 14% below H1 2011, due to expected lower grade material mined at Buzwagi, waste stripping at North Mara and batch processing at Tulawaka.
Cash cost per ounce sold2 of US$938 per ounce, up 43% on H1 2011, primarily due to lower production, higher energy costs and industry wide cost pressures.
Board approved the expansion of the Carbon in Leach Circuit at Bulyanhulu.
Waste rock permits for North Mara received, critical to the expected production increase in H2 2012.
Continued success in our exploration programmes:
Declared an in-pit gold resource of 3.75 million ounces Indicated and 0.85 million ounces Inferred at Nyanzaga.
Delineated an additional 1 million ounce gold resource at Gokona, North Mara.
Successfully extended Tulawaka's mine life into 2013.
Financial Highlights
Revenue of US$534 million, down 8% on H1 2011.
Cash margin2 of US$704 per ounce, a decrease of 13% on H1 2011.
Impact of planned lower production levels due to mine sequencing contributed to:
EBITDA2 of US$171 million, down 30% on H1 2011.
Net profit of US$65 million, down 46% on H1 2011, with EPS of US15.9 cents.
Net cash position of US$504 million as at 30 June 2012.
Proposed interim dividend of US4.0 cents per share, up 25% on 2011.
Three months ended Six months ended African Barrick Gold plc 30 June 30 June % % (Unaudited) 2012 2011 change 2012 2011 change
Attributable Gold Production (ounces)1 153,099 171,950 -11% 297,742
345,857 -14%
Attributable Gold Sold (ounces)1 157,224 185,080 -15% 302,641
357,082 -15%
Cash cost per ounce sold (US$/ounce)2 950 652 46% 938
655 43%
Average realised gold price (US$/ounce)2 1,591 1,524 4% 1,642
1,461 12% (in US$'000) Revenue 266,930 311,760 -14% 534,467 578,387 -8% EBITDA 2 81,381 140,072 -42% 170,939 244,927 -30%
Cash generated from operating activities 54,783 99,450 -45% 110,309
186,134 -41%
Net profit attributable to owners 29,889 69,773 -57% 65,152
120,134 -46%
Basic earnings per share (EPS) (cents) 7.3 17.0 -57% 15.9
29.3 -46% Dividend per share (cents) 4.0 3.2 25% 4.0 3.2 25%
Operating cash flow per share (cents) 2 13.4 24.2 -45% 26.9
45.3 -41%
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, operating cashflow per share and cash margin are non-IFRS financial performance measures withno standard meaning under IFRS. Refer to "Non-IFRS measures" on page 29 for thedefinition of each measure.Commenting on the results, CEO Greg Hawkins said: "Over the first six months ofthe year we have delivered solid results, while making significant progress indeveloping the business. The Board approved our first brownfield growthproject, we declared a substantial in-pit resource at Nyanzaga and have furtherdemonstrated our commitment to Tanzania through our new royalty agreement. Overthe second half of 2012 our focus will be on continuing to deliver against ourmine plan with an expected grade driven increase in production andcorresponding decline in cash costs, while maintaining capital discipline. Wemaintain our guidance for the full year, although expect to be towards theupper end of our cash cost range. With the continuing cost pressure in theindustry, we will be intensifying our focus on taking costs out of the businesswith the aim of maximising returns for shareholders."
Current operations
As expected, the first half of the year was characterised by the step down toreserve grade at Buzwagi, representing a 38% decrease on the prior year period,the ongoing waste stripping programme at North Mara and the start of batchprocessing at Tulawaka. As a result, we have seen lower production and highercash costs than in the prior year period, with H1 2012 attributable productionamounting to 297,742 ounces compared to 345,857 ounces in H1 2011. As weprogress current mining schedules, we remain confident that we will benefitfrom increased grades during the second half of the year, which should allow usto deliver increased production and lower cost, in line with our guidance.
We continued to optimise our gold inventory levels throughout the reporting period and as a result sold 302,641 attributable gold ounces for the first six months of the year, 2% above production.
We mined 21.7 million tonnes in the first half of the year, compared to 22.7million in H1 2011, primarily as a result of waste dumping constraints at NorthMara, which have now been alleviated as a result of the grant of thepotentially acid forming ("PAF") waste rock dump permit for the mine.Tonnes of ore processed for the first half of the year totalled 3.7 million, a4% increase on 2011 levels of 3.6 million tonnes. The average grade for thefirst half of the year of 2.9 grams per tonne ("g/t") was in line with plan but15% lower than H1 2011, driven primarily by the planned reversion to reservegrade at Buzwagi.
Our copper production in the first half of the year of 6.1 million pounds represented a 22% decrease on H1 2011 (7.8 million pounds), driven by lower copper grades at both Bulyanhulu and Buzwagi.
We saw a 43% increase in cash costs per ounce sold over the first half of 2011 to US$938. The key contributors and the cash cost per ounce impact to this increase were:
lower production base and associated lower co-product revenue, combined with lower realised copper prices (US$137/oz);
higher energy costs due to increased usage and pricing of diesel in tandem with increased electricity tariffs (US$66/oz); and
increased maintenance costs due to the impact of plant downtime at North Mara and Buzwagi and a revised owner maintenance model at North Mara (US$44/oz).
Cash costs of US$76 per tonne milled for the first half of the year were 17%higher than the prior year period, primarily as a result of the key costfactors explained above which were partially offset by the increase in tonnesmilled.We expect current cost levels to reduce throughout the second half of the yearas head grade and production levels improve at each of our operations. Insupport of this, we will maintain our focus on minimising the impact ofinflationary pressures on each of our operations and will continue to exploreopportunities over the next twelve months to reduce costs through localisationefforts, lower cost power sources and the ongoing optimisation of ouroperations.Bulyanhulu performed in line with expectations and delivered solid results forthe reporting period. During the period, the Board also approved our firstbrownfield expansion project involving the construction of a new 2.4 milliontonnes per annum ("Mtpa") Carbon in Leach ("CIL") circuit at the process plantwhich will provide additional production of 600 thousand ounces ("Koz") overthe life of mine ("LOM") from H1 2014.As noted above, waste stripping for the first few months of the year wasconstrained at North Mara, predominantly as a result of delays with PAF permitsand land acquisitions. The grant of the PAF permit at the end of April allowsus to move ahead with the waste stripping programme, in order to access highergrade areas in the Gokona pit during the second half of the year.As planned, Buzwagi has operated close to its reserve grade of 1.5g/t for thefirst six months of 2012. In addition, ongoing grid instability and a number ofunplanned shutdowns have impacted the operation, with the process plantoperating at 80% of capacity over the reporting period. As part of the plan toaddress this, the process plant at Buzwagi has been running predominantlyondiesel power generationto ensure the reliability of power supply and we haveseen noticeable improvements to date. We are also increasing mining capacity,in order to deliver increased future production, with further additions to themining fleet.Tulawaka continued to perform in line with expectations during the reportingperiod, as it transitioned to a solely underground operation and the processplant began to operate under a batch processing method. This led to an expectedreduction in production and associated higher cost. An increase in the gradeprofile is expected during the second half of the year, which should help toincrease production levels and lower cash costs at the mine. In addition, wehave progressed our exploration drilling programmes and have replaced reservesmined so far in 2012 which will enable the mine to continue operating into mid2013. We will provide further updates later this year as we progress our mineplanning for 2013.Our Total Reportable Injury Frequency Rate ("TRIFR") of 0.82 is 31% lower thanthe corresponding period in 2011 and we continue to implement furtherinitiatives in order to continually improve safety and ensure that all of ouremployees go home safely every day. It is with great regret that we report avehicle incident in May at Buzwagi that claimed the life of one of ourcontractors. We have carried out a thorough investigation into the incident andare in the process of strengthening procedures to ensure this type of accidentis not repeated.Financial results
Our financial performance over the first half of the year reflected the planned lower production levels when compared to the corresponding period, with the benefit of the 12% increase in the gold price compared to H1 2011. Notwithstanding the lower production levels, we generated EBITDA of US$171 million and EPS of US15.9 cents, which enabled us to declare an interim dividend of US4.0 cents per share for 2012, up 25% on 2011.
We are also in a position to continue to invest in profitable growth in ourbusiness, as evidenced by the approval of the Bulyanhulu CIL expansion duringthe period on which we expect to commit up to US$50 million in 2012. We havealso invested US$119 million over the first half of the year in our ongoingoperations in order to maintain our strong operational platform. While we arecommitted to investing in the business, we also remain focused on improvingefficiencies throughout the organisation in order to further enhance cost andcapital control.
Exploration and growth projects
We have made further progress in our portfolio of growth projects in the firsthalf of the year, having announced Board approval for the Bulyanhulu CILexpansion, a project that will add over 600Koz of production over the LOM,starting from 2014 and will help to lower overall cash costs at the mine. Inaddition, we have made good progress on our other projects as follows:
Gokona Expansion: we continue to evaluate the extension of the open pit in parallel with the underground development at the Gokona pit. Following the successful completion of the 18 month drilling programme and initial reworking of the open pit, we have been able to delineate an additional 1.0Moz of resource in the extended open pit and the underground.
Bulyanhulu Upper East Project: mining of the test stope is on track to commencein Q3 2012 to test the mining method and geotechnical assumptions. We haveinitiated a further drilling programme to test whether Reef 2, which currentlysits outside of the project, can be mined in parallel and we will providefurther updates in due course. This will not affect the timing of the project.Tulawaka: drilling continues to be successful, and we have been able to replacereserves in the first half, thereby extending the mine life into mid 2013.Deeper drilling continues to encounter continuity of mineralisation at depthand we are targeting further extensions of the mine life.Greenfield exploration activities during the reporting period continued tofocus on the Nyanzaga project where we were able to declare an initial in-pitresource of 4.1Moz of gold in January and then, in April, upgrade further to4.6Moz, consisting of 3.75Moz at 1.42g/t Au Indicated and 0.75Moz at 1.81g/t AuInferred, through the inclusion of Kilimani near surface mineralisation andfurther material at depth.
Interim Dividend
In line with ABG's formal dividend policy of paying out between 15% and 30% ofearnings in the proportion of approximately one third following the interimresults and two thirds following the final results, the Board of ABG hasapproved an interim dividend for 2012 of US4.0 cents per share, a 25% increaseon the amount paid in 2011.The interim dividend will be paid on 24 September 2012 to holders on record at31 August 2012. The ex-dividend date will be 29 August 2012. ABG will declarethe interim dividend in US dollars. Unless a shareholder elects to receivedividends in US dollars, they will be paid in pounds sterling with the USdollar interim dividend being converted into pounds sterling at exchange ratesprevailing at the relevant time. The last date for receipt of currencyelections will be 3 September 2012. The exchange rate conversion for theinterim dividend will be made on or around 4 September 2012.
Outlook
Over the past six months, we have made significant progress towards the ongoingdevelopment of the business, through both our existing mines and our portfolioof growth projects. We look forward to building on this progress in the secondhalf, where we expect production to increase with a subsequent decline in cashcosts per ounce sold, in accordance with our mine plan. As a result, wemaintain our production guidance of 675,000-725,000 ounces of gold for 2012. Atthe same time, we still expect our cash costs for the year to come within therange set of US$790-860 per ounce (US$740-810 per ounce on a cash operatingcost basis, excluding royalties), albeit in the upper part of the range.As part of our longer term focus, we continue to drive operational efficienciesto optimise production at our existing assets, whilst focusing on the growth ofour business through our organic projects and potential acquisitions. With theongoing economic uncertainty and challenges within the global market, we remainpositive on the outlook for gold, and are confident that the fundamentalattraction of the precious metal as a store of value will continue to supportfuture gold prices.Other developments
Agreement to Acquire Interests in Kenyan Licences
ABG has today announced that it has entered into an agreement with AvivaCorporation Limited to acquire all of the outstanding sharecapital of Aviva Mining (Kenya) Limited ("AMKL"), the assets of which includeinterests in a number of Licences in West Kenya, for initial cash considerationof A$20 million. The acquisition is subject to the approval of Aviva'sshareholders, which is expected to be sought at a general meeting in lateAugustor early September; and the consent of the Kenyan Competition Authority, withcompletion expected shortly thereafter. The properties, which have only seen limited previous exploration, containmultiple large gold anomalies and cover five contiguous licences over a landpackage in excess of 2,800km2 of the highly prospective Ndori Greenstone Beltin Kenya, which forms part of the Tanzanian Archaean Craton. Sporadic, historicand current exploration activities have identified a large number of targetsthat justify extensive follow-up, and ABG intends to implement a systematic andfocused gold exploration programme. These targets will represent a significantaddition to the grassroots and target delineation segments of our explorationpipeline.Board ChangesFollowing his departure from Barrick in June 2012, Aaron Regent stepped down asChairman of ABG. Since then, Derek Pannell, Senior Independent Director of ABGhas been Acting Chairman of the Board. We also welcomed Kelvin Dushnisky,Executive Vice President, Corporate and Legal Affairs of Barrick, as a nomineeDirector to the Board of ABG during the reporting period, and he brings manycomplementary and valued skills to the Board.Also, during the first half of the year James Cross stepped down asNon-Executive Director. Mr Cross' breadth of experience and detailed knowledgeof Africa was a valued source of advice for the Board and we wish him well forthe future.More recently, on 19th July 2012, we welcomed Rick McCreary, Senior VicePresident, Corporate Development of Barrick as a nominee Director to the Boardof ABG. Before joining Barrick in April 2011, Mr. McCreary worked in mininginvestment banking for over fourteen years culminating as Head of CIBC WorldMarkets' Global Mining investment banking group. Prior to his career in mininginvestment banking, he worked in the Noranda/Falconbridge organisation foreight years in various areas, including metals marketing, geophysics,geological engineering and technology development.We are in the process of identifying an additional Independent Non-ExecutiveDirector for the Board. This will restore the appropriate balance betweenIndependent and Non-Independent Directors following the recent changes to theBoard.Regulatory and tax frameworkDuring the reporting period we concluded discussions with the TanzanianGovernment with respect to the level of royalty payments applicable to ouroperations. In light of the current gold price environment, we have agreed to avoluntary additional 1% royalty going forward. This is in addition to the 3%rate stipulated in our Mineral Development Agreements ("MDAs"), which remainunchanged. This decision is an important step for ABG and has been taken aftercareful consideration, based on ABG's overall tax status in Tanzania, in orderto ensure we achieve the optimum long-term structure for our operations and allof our stakeholders.
North Mara licence renewal and Environmental Protection Order ("EPO") update
The Mining Advisory Board required to approve the renewal of the Special MiningLicence at North Mara was formed during the reporting period and we have beeninformed that it will deal with the licence renewal as one of its immediatepriorities. In the meantime, operations at North Mara will continue under theterms of our existing licence, ensuring that there remains no disruption to ourmining activities.The joint water sampling exercise with NEMC, the Tanzanian environmentalregulator, and an independent third party, to test the quality of the outputfrom the water treatment plant at North Mara continued through the period andwill extend into the second half of 2012. Once successfully completed, the EPOshould be lifted, which would allow North Mara to discharge water from the minesite. We aim to complete this exercise in the second half of 2012.For further information, please visit our website: www.africanbarrickgold.comor contact: +44 (0)207 129 African Barrick Gold plc 7150
Andrew Wray, Head of Corporate Development & Investor
Relations
Giles Blackham, Investor Relations Manager
+44 (0)207 251 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. ABG has a high-quality asset base, solid growth opportunities and a clear strategy for growth.
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 toour people, the environment and the communities in which we operate is centralto achieving our objectives.ABG is a UK public company with its headquarters in London. We are listed onthe Main Market of the London Stock Exchange under the symbol ABG and have asecondary listing on the Dar es Salaam Stock Exchange. Historically and priorto our initial public offering (IPO), our operations comprised the Tanzaniangold mining business of Barrick Gold Corporation (Barrick), our majorityshareholder. ABG reports in US dollars in accordance with IFRS as adopted bythe European Union, unless otherwise stated in this report.
Presentation and conference call
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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 andother factors. Although ABG's management believes that the expectationsreflected in such forward-looking statements are reasonable, investors arecautioned that forward-looking information and statements are subject tovarious risks and uncertainties, many of which are difficult to predict andgenerally beyond the control of ABG, that could cause actual results anddevelopments to differ materially from those expressed in, or implied orprojected by, the forward-looking information and statements contained in thisreport. Factors that could cause or contribute to differences between theactual results, performance and achievements of ABG include, but are notlimited 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 exchangerates), ABG's ability to recover its reserves or develop new reserves,including its ability to convert its resources into reserves and its mineralpotential into resources or reserves, and to timely and successfully processits mineral reserves, risks of trespass, theft and vandalism, changes in itsbusiness strategy, as well as risks and hazards associated with the business ofmineral exploration, development, mining and production. Accordingly, investorsshould not place reliance on forward-looking statements contained in thisreport.The forward-looking statements in this report reflect information available atthe time of preparing this report. Subject to the requirements of theDisclosure and Transparency Rules and the Listing Rules or applicable law, ABGexplicitly disclaims any obligation or undertaking publicly to release theresult of any revisions to any forward-looking statements in this report thatmay occur due to any change in ABG's expectations or to reflect events orcircumstances after the date of this report. No statements made in this reportregarding expectations of future profits are profit forecasts or estimates, andno statements made in this report should be interpreted to mean that ABG'sprofits or earnings per share for any future period will necessarily match orexceed the historical published profits or earnings per share of ABG or any
other level.AFRICAN BARRICK GOLD LSE: ABG TABLE OF CONTENTSKey Statistics 7 Interim Operating Review 9
Exploration and Development Update
13 Financial Update 22 Non-IFRS measures 29
Principal Risks and Uncertainties
31
Statement of Directors' Responsibility
32 Auditor's Review Report 33
Consolidated Income Statement and Consolidated Statement of Comprehensive
34Income Consolidated Balance Sheet 35
Consolidated Statement of Changes in Equity
36
Consolidated Statement of Cash Flows
37
Notes to the Consolidated Interim Financial Information
38 Key StatisticsAfrican Barrick GoldAfrican Barrick Gold plc Three months ended Six months ended 30 June 30 June (Unaudited) 2012 2011 2012 2011 Operating results
Tonnes mined (thousands of tonnes) 11,834 10,901 21,673 22,660
Ore tonnes mined (thousands of tonnes) 1,848 1,614 3,595 3,223
Ore tonnes processed (thousands of tonnes) 1,840 1,693 3,742 3,613
Process recovery rate (percent) 87.4% 88.7% 86.7% 87.9% Head grade (grams per tonnes) 3.0 3.6 2.9 3.4
Attributable gold production (ounces)¹ 153,099 171,950 297,742 345,857
Attributable gold sold (ounces)¹ 157,224 185,080 302,641
357,082
Copper production (thousands of pounds) 3,121 4,068 6,126 7,809
Copper sold (thousands of pounds) 3,443 4,147 5,959
7,882
Cash cost per tonne milled² (US$) 81 71 76
65 Per ounce data (US$/ounce) Average spot gold price³ 1,609 1,506 1,651
1,445
Average realised gold price² 1,591 1,524 1,642 1,461 Cash cost² 950 652 938 655 Amortisation and other costs² 218 168 222 172 Total production cost² 1,168 820 1,160 827 Cash margin² 641 872 704 806 Average realised copper price (US$/lb) 3.07 3.89 3.53 4.20 Three months ended Six months ended 30 June 30 June (Unaudited) Financial results 2012 2011 2012 2011 (in US$'000) Revenue 266,930 311,760 534,467 578,387 Cost of sales (201,159) (176,487) (386,981) (344,639) Gross profit 65,771 135,273 147,486 233,748 Corporate administration (10,454) (7,667) (25,609) (20,525) Exploration and evaluation costs (3,870) (8,621)
(10,385) (16,078)
Corporate social responsibility expenses5 (4,611) (642) (6,750) (1,372) Other charges5 (1,360) (10,260) (4,275) (14,200) Profit before net finance expense and taxation 45,476 108,083 100,467 181,573 Finance income 813 437 1,079 809 Finance expense (2,378) (2,239) (4,689) (4,121) Profit before taxation 43,911 106,281 96,857 178,261 Tax expense (14,829) (33,862) (31,335) (54,031) Net profit for the period 29,082 72,419 65,522 124,230
Profit/ (loss) attributable to:
- Non-controlling interests (807) 2,646 370 4,096 - Owners of the parent 29,889 69,773 65,152 120,134 Three months ended Six months ended 30 June 30 June (Unaudited) Other Financial information
(in US$'000 except per share figures) 2012 2011 2012
2011 Cash and cash equivalents 503,667 455,077 503,667 455,077 Cash generated from operating activities 54,783 99,450 110,309 186,134 Capital expenditure4 70,835 67,275 124,906 118,666 EBITDA2 81,381 140,072 170,939 244,927
Basic earnings per share (cents) 7.3 17.0 15.9
29.3
Operational cash flow per share2 (cents) 13.4 24.2 26.9
45.3 Equity 2,807,761 2,651,571 2,807,761 2,651,571
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, total cash cost perounce sold, amortisation and other costs per ounce, total production cost perounce, EBITDA, operational cash flow per share and cash margin are non-IFRSfinancial performance measures with no standard meaning under IFRS. Refer to"Non-IFRS measures" on page 29 for definitions.
3 Reflects the London PM fix price.
4 Includes non-cash rehabilitation asset adjustments and finance lease purchases during the period.
5 Restated to separately disclose corporate social responsibility expenses on the face of the income statement.
Interim Operating ReviewBulyanhuluKey statistics Six months Three months ended ended Bulyanhulu 30 June 30 June (Unaudited) 2012 2011 2012 2011
Underground ore tonnes hoisted Kt 256 271 506 538
Ore milled Kt 286 286 532 539 Head grade g/t 8.4 8.3 8.5 8.6 Mill recovery % 90.4% 90.4% 90.8% 91.1% Ounces produced oz 69,750 69,272 131,586 135,537 Ounces sold oz 71,201 72,698 133,417 141,805 Cash cost per ounce sold US$/oz 699 573 700 578 Cash cost per tonne milled US$/t 174 146 176 152 Copper production Klbs 1,851 2,186 3,482 4,224 Copper sold Klbs 1,808 2,202 3,253 4,141 Capital expenditure US$(000) 21,424 18,553 40,239 34,769 Operating performance
Bulyanhulu performed in line with management expectations and continued to deliver solid results for the reporting period.
Gold production for the first half of the year was 131,586 ounces, 3% lowerthan the prior year's total of 135,537 ounces due to slightly lower head gradeand recoveries. Production for the second quarter of the year increased by 13%on the first quarter and was marginally ahead of the prior year comparativeperiod.Mill throughput for the first half of the year was broadly in line with theprior year period. We saw an improvement in the second quarter of 16% over thefirst quarter, and we should see further benefit from the investment in plantefficiencies in the second half of 2012. We continue to expect the upgrading ofour back up power capacity at the mine to be completed during the thirdquarter.Tonnes hoisted for the year were 6% lower than the prior year period and werenegatively impacted by shaft availability due to the impact of power outagesand associated maintenance. Copper production for the first half of the year of 3.5 million pounds was 18%lower than that of the same period in 2011 as a result of lower grades. Cashcosts for the first half of the year of US$700 per ounce sold were 21% higherthan the prior year comparative of US$578. This increase is predominantlyattributable to the lower production base and co-product revenue, increasedenergy costs from the increased necessity to self generate power, and increasedmaintenance costs to address plant operational inefficiencies. This was in partoffset by lower smelting and refining fees and increased capitalisedunderground development.
Cash costs per tonne milled increased to US$176 in 2012 compared to US$152 in the prior year period as a result of the cost increases outlined above.
Capital expenditure for the six month period totalled US$40.2 million, 16% higher than the US$34.8 million in the prior year. Key capital expenditure included:
Capitalised development: capitalised underground development of US$22.1 million;
Expansion capital: Bulyanhulu CIL expansion project and Upper East expansion of US$1.2 million; and
Sustaining capital: US$16.9 million mostly relating to mining equipment, infrastructure and continuous improvement projects and non-cash rehabilitation asset adjustments of US$1.9 million.
BuzwagiKey statistics Three months ended Six months ended Buzwagi 30 June 30 June (Unaudited) 2012 2011 2012 2011 Tonnes mined Kt 7,088 4,347 11,991 9,672 Ore tonnes mined Kt 1,189 646 2,108 1,677 Ore milled Kt 837 583 1,765 1,423 Head grade g/t 1.5 2.5 1.5 2.4 Mill recovery % 85.6% 89.5% 83.9% 88.0% Ounces produced oz 34,459 41,613 70,731 97,926 Ounces sold oz 37,928 46,932 71,249 101,033 Cash cost per ounce sold US$/oz 1,195 566 1,152 620
Cash cost per tonne milled US$/t 54 46 47 44
Copper production Klbs 1,270 1,882 2,644 3,585 Copper sold Klbs 1,636 1,945 2,707 3,741 Capital expenditure US$(000) 19,418 17,916 32,485 20,900 Operating performanceAs planned, Buzwagi has operated close to its reserve grade of 1.5g/t for thefirst six months of 2012, a 38% decrease on the prior year period. As a resultthere has been a focus on increasing mining rates in order to maintainproduction. Tonnes mined for the half year increased by 24% on the comparativeprior year period due to an increased focus on waste stripping, additionalhauling capacity and the improvement in equipment availability. Equipmentavailability in the second quarter was notably improved due to enhancedmaintenance regimes which led to an increase of 45% in total tonnes minedcompared to the first quarter of 2012.As a result of the lower grade and resultant lower recoveries, gold productionof 70,731 ounces for the six months was 28% lower than the previous year perioddespite a 24% increase in tonnes milled. Gold ounces sold were broadly in linewith production. The process plant has not reached the expected throughputrates over the period as a result of ongoing power related issues and a numberof unplanned maintenance shutdowns. As a result of this, during the secondquarter Buzwagi moved to running predominantlyon diesel power generationtoensure stability of power supply to the process plant. We continue to expect animprovement in throughput as we move into the second half of the year.
Copper production for the six month period of 2.6 million pounds was 26% below the prior year's production. This was mainly due to the lower concentrate production as a result of lower grade.
Cash costs for the first half of the year were US$1,152 per ounce sold comparedto US$620 in H1 2011. The key drivers of this increase were the step up inmining and processing levels together with the expected reduction in gradecompared to the prior year period, as well as the lower production base andco-product revenue. The increased activity led to significantly higher energycosts which were also driven by the increased reliance on self generation, andincreased consumable costs due to additional usage. These were partially offsetby the capitalisation of waste stripping; higher cost allocation to orestockpiles on hand predominantly driven by lower throughput compared to miningand a higher cost base; and lower contracted services costs.
Cash costs per tonne milled increased to US$47 in H1 2012 from US$44 in H1 2011. The increase in costs was primarily due to the key cost factors explained above which was partially offset by increased tonnes milled.
Capital expenditure for the reporting period totalled US$32.5 million, 55% higher than the US$20.9 million in the prior year period. Key capital expenditure included:
Capitalised development: capitalised deferred stripping of US$8.7 million; and
Sustaining capital: US$23.8 million relating to plant improvements and miningequipment of which US$5.3 million related to the mining acceleration projectand US$2.0 million of non-cash rehabilitation asset adjustments.We are expanding the mining fleet at Buzwagi in order to accelerate mining witha view to delivering increased production, whilst reducing operating risk andcash costs by ensuring the required effective utilisation is maintained. Themining fleet expansion will cost an estimated US$21 million of whichapproximately US$8 million will be incurred in 2012.North MaraKey statistics Three months ended Six months ended North Mara 30 June 30 June (Unaudited) 2012 2011 2012 2011 Tonnes mined Kt 4,461 6,254 8,852 12,390 Ore tonnes mined Kt 374 668 879 947 Ore milled Kt 677 751 1,337 1,500 Head grade g/t 2.3 2.3 2.2 2.1 Mill recovery % 82.8% 83.8% 81.1% 81.4% Ounces produced oz 41,515 46,003 76,876 83,602 Ounces sold oz 41,550 49,700 79,600 85,650 Cash cost per ounce sold US$/oz 1,100 853 1,119 814
Cash cost per tonne milled US$/t 67 56 67 46
Capital expenditure US$(000) 21,365 24,468 35,201 52,143 Operating performanceThe focus for the first six months of the year at North Mara remained on thewaste stripping programme in the Gokona and Nyabirama pits. Activity wasconstrained due to delays in the issuing of waste dumping permits at the newlyconstructed PAF waste dumps and delays regarding land acquisition andrelocation of communities surrounding the Nyabirama pit, resulting in lowertonnes mined. Approval of the PAF permit was obtained at the end of April, andfull PAF waste movement commenced in June. This will enable us to deliver inline with the mine plan by accessing higher grade zones in the Gokona pit fromthe second half of this year. Gold production for the first half of the year was 76,876 ounces, down 8% on H12011 but broadly in line with expectations. Ore mined from the Gokona pit droveoverall mine grade slightly higher at 2.2g/t but the impact was more thanoffset by lower mill throughput as a result of unplanned maintenance. Goldounces sold amounted to 79,600 ounces for the first half of the year, lowerthan the same period in 2011, but in line with lower production. The secondquarter of 2012 showed a 17% increase in production over the first quarter ofthe year driven mainly by improved throughput, grade and plant recoveries.Cash costs for the first half of the year were US$1,119 per ounce sold comparedto US$814 in the prior year period. The increase in cost was primarily drivenby the lower capitalisation of costs compared to H1 2011 and a reduction in theproduction base. These were partially offset by lower contractor services costsdue to a move away from contract maintenance and a reduction in consumableusage due to lower mining and milling activity.
Cash costs per tonne milled increased to US$67 in H1 2012 from US$46 in H1 2011, primarily due to the key cost factors explained above and lower plant throughput.
Capital expenditure for the reporting period totalled US$35.2 million, 32% lower than the US$52.1 million in the prior year period. Key capital expenditure included:
Capitalised development: capitalised deferred stripping of US$8.2 million;Expansion capital: capitalised exploration drilling of US$4.6 million; andSustaining capital: US$22.4 million driven predominantly by mining equipment,investment in continuous improvement projects, the water treatment plant andnon-cash rehabilitation asset adjustments of US$1.3 million.The joint water sampling exercise with NEMC, the Tanzanian environmentalregulator, and an independent third party, to test the quality of the outputfrom the water treatment plant at North Mara continued through the period andwill extend into the second half of 2012. Once successfully completed, the EPOshould be lifted, which would allow North Mara to discharge water from the minesite. We aim to complete this exercise in the second half of 2012.In March 2012, we were pleased to announce the signing of individual agreementswith all seven villages surrounding the mine, which provide for an investmentof US$8.5 million over the next three years in the local communities. Theseagreements include two new Village Benefit Agreements with the villages ofNyakunguru and Matongo that did not previously have formal agreements in place,together with implementation agreements with each of the five villages(Nyangoto, Kewanja, Kerende, Genkuru and Nyamwaga) that had previously signedVillage Benefit Agreements with North Mara in 1995/96. The form of investmentin each of the villages will differ, but includes the development of schoolinfrastructure, provision of clean water, the upgrading of a local healthcentre, rehabilitation of village offices and improvements to the roadinfrastructure. In addition, we are continuing to invest in a range ofinitiatives in the communities surrounding all of our operations through theABG Maendeleo Fund.TulawakaKey statistics Six months Three months ended ended Tulawaka (reflected as 70%) 30 June 30 June (Unaudited) 2012 2011 2012 2011
Underground ore tonnes hoisted Kt 29 30 59 60
Open pit ore tonnes mined Kt - - 43 - Open pit waste tonnes mined Kt - - 222 - Ore milled Kt 41 74 108 151 Head grade g/t 5.9 6.7 5.6 6.3 Mill recovery % 95.9% 95.0% 95.6% 94.3% Ounces produced oz 7,376 15,062 18,550 28,792 Ounces sold oz 6,545 15,750 18,375 28,595 Cash cost per ounce sold US$/oz 1,305 645 1,046 686 Cash cost per tonne milled US$/t 211 138 178 130 Capital expenditure (100%) US$(000) 4,442 5,384 9,564 9,279 Operating performanceTulawaka continued to perform in line with expectations during the reportingperiod. We are progressing our exploration drilling programmes and havereplaced reserves mined to date in 2012, allowing the mine life to be extendedagain, into the middle of 2013. Work is currently ongoing to construct a secondunderground portal, which will provide increased access for mining and futuredrill platforms.During the second quarter of 2012, Tulawaka focused on process plantoptimisation given ore stockpile levels. This resulted in the application ofbatch milling where the mill was being run at optimum throughput levels forshorter periods of time as opposed to low throughput levels on a consistentbasis. This resulted in mill throughput decreasing by 39% in the second quarterof 2012, leading to production for the quarter of 7,376 ounces, 51% lower than2011.As a result of the above, Tulawaka's attributable gold production for the sixmonths was 18,550 ounces, 36% lower than the 28,792 ounces produced in 2011.Gold ounces sold were in line with production and 36% lower than in 2011. Headgrade was 11% lower than 2011 as a result of the blending of the last of thelow grade stockpiles into the mill feed in the second quarter and shouldimprove as we progress through the year.Cash costs for the first half of the year were US$1,046 per ounce sold comparedto US$686 in the prior year period. This cost increase was mainly due to thelower production base, an increase in mining activity (specifically relating toopen pit mining during the first quarter) in combination with the costsincurred to service an ageing mining fleet and increased general administrationcost.
Cash costs per tonne milled increased to US$178 in H1 2012 from US$130 in H1 2011, primarily as a result of the higher cost base as explained above and lower mill throughput due to the batch milling campaign.
Capital expenditure for the reporting period totalled US$9.6 million, 3% higher than the US$9.3 million in the prior year period.
Key capital expenditure included:
Capitalised development: capitalised underground development of US$3.6 million;
Expansion capital: capitalised exploration drilling of US$1.9 million; and
Sustaining capital: US$4.1 million sustaining capital including a non-cash rehabilitation asset adjustment credit of US$0.6 million.
Exploration and Development Update
Exploration and development programmes during the first half of the year metwith good success, especially at our North Mara and Nyanzaga projects, wheredrilling continues to deliver encouraging results. The Exploration and Projectsteams remain focused on ABG's strategy of organic growth through near-mineexploration, resource expansion, optimisation of existing assets, and regionalexploration programmes. The principal focus for the first half of 2012 has beenon advancing the highest ranked projects in ABG's development pipeline. A totalof 422 holes for 79,400 metres have been completed across the exploration anddevelopment projects and significant progress has been made on most projects.At the Nyanzaga Project, an initial in-pit resource of 4.1Moz of gold,consisting of 3.5Moz at 1.47 g/t Au Indicated and 0.6Moz at 2.05g/t Au Inferredwas released in January 2012. This represented a fourfold increase on thepreviously declared resource of 0.3Moz Indicated and 0.6Moz Inferred.Subsequently, in April 2012, we announced the resource had increased by afurther 0.5Moz and is now in excess of 4.6Moz Au, consisting of 3.75 Moz at1.42g/t Au Indicated and 0.85Moz at 1.81g/t Au Inferred. The updated modellingconfirms the opportunity to exploit the Tusker and Kilimani mineralised zonesin a single open pit and the project is expected to move into thepre-feasibility study stage in the second half of 2012.At Bulyanhulu, the ABG Board approved a construction of a new 2.4Mtpa CILcircuit. The project has a pre-tax Internal Rate of Return ("IRR") of 22.1% atcurrent gold prices and will provide additional life of mine production inexcess of 600 thousand ounces ("Koz") from H1 2014 at a lower cash cost thanthe underground mine. This is the first step in the future optimisation of theBulyanhulu mine.At the Bulyanhulu Upper East Reef 1 Project, the feasibility study is completeand mining of the test stope will commence in Q3 2012 to assess the proposedmining method as well as geotechnical conditions in the zone. Drillingprogrammes on near surface material on Bulyanhulu Reef 2 at the Upper East Zonehave shown initial success and will be expanded to better delineate reservesand resources between 150 metres and 600 metres below surface, in order toinvestigate the potential of expanding the Upper East Zone Project toincorporate accessing Reef 2 Upper East ore at the same time as Reef 1. At North Mara, positive results continue to be returned from the 2011-2012infill drilling programme and we have delineated an additional 1.0Moz ofresource beneath and within the expanded Gokona open pit. The results of thedrilling programme are being incorporated into an updated feasibility study onGokona Underground which is being undertaken in conjunction with the currentoptimisation of the open pit expansion.Also at North Mara, testing below the final planned Nyabirama open pit forpotential mineable underground resources has been positive with drillingintersecting multiple, high-grade zones. With a number of assays still to bereceived, we estimate that a resource of 0.5Moz will be delineated. The currentphase of drilling is expected to be completed in early H2 2012 with a secondphase of drilling likely to be undertaken once an initial underground resourceand study is complete.At Tulawaka East Zone Underground, exploration drilling continues to besuccessful, and we have been able to fully replace mined reserves in the firsthalf, thereby extending the mine life into 2013. Deeper drilling continues toencounter continuity of mineralisation at depth and we continue to beoptimistic about extending the mine life further.
ORGANIC GROWTH PROJECTS
NORTH MARA
At North Mara the focus year to date has been on the infill drilling ofInferred resources around the Gokona open pit. Phase one of the resourcedefinition programme at Gokona was completed in late May 2012, and a revisedmid-year resource for both the underground and an expanded open pit has beencalculated, with the plan now to progress both the pit expansion and theunderground feasibility study once all assay results have been received. TheNyabirama Deeps infill programme has been expanded and is moving towardscompletion with positive results from the drill programme continuing to bereceived. The aim of all these programmes is to delineate, and ultimatelyproduce, underground ounces at North Mara and at the same time extend the lifeof mine.
Figure - 3D view of Gokona open pit models and current underground block model (with blocks greater than 2g/t Au shown)
[For picture see www.africanbarrickgold.com]
Gokona
The successful 2011 and 2012 Gokona drilling programme has effectively addedapproximately 1.0Moz of resources, split between the expanded open pit (0.5Moz)and the underground (0.5Moz) with only approximately 65% of the originalplanned programme completed due to access issues in and around the mininginfrastructure.
Open Pit Expansion
Due to the improvement in community relations at North Mara, we now have theopportunity to re-site a public road which had previously constrained access.As a result we have reworked the mine plan to incorporate a lateral cut back ofthe open pit. Mine plan optimisations remain ongoing but the latest pit designsincorporate an additional 0.5Moz into the open pit. We will provide a furtherupdate on this later in the year once we have completed the re-optimisation
ofthe open pit planning.UndergroundThe first phase of a significant resource drill-out programme beneath theplanned Gokona and Nyabigena open pits was completed during H1 2012. A total of12,636 metres of drilling was completed during H1 2012, bringing the total forthe resource definition drill programme to 40,810 metres. An additionalresource of 0.5Moz has been calculated with the revised underground resourcenow to approximately 0.9Moz, which will now be incorporated into an updatedfeasibility study on the underground which we expect to complete during H22012. Infill drilling has continued to return very positive assay resultsshowing good continuity of mineralised zones encountered in broader spacedexploration drilling. Several wide zones of high-grade gold mineralisation werealso returned. Based on the positive results from exploration and infilldrilling which show the system remains open and robust in terms of grade atdepth, it is anticipated that further deep drilling is warranted and couldfurther expand the underground resources in the future.
Selected significant assay results received for H1 2012 include:
GKD334: 3m @ 17.9g/t Au from 29m, 3m @ 3.7g/t Au from 174m and 21m @ 15.4g/t Au from 188m.
GKD337: 7m @ 31.0g/t Au from 457m and 11m @ 8.2g/t Au from 467m.
GKD338W: 5m @ 5.6g/t Au from 326m and 3m at 24.9g/t Au from 363m.
GKD348A: 20m @ 22.4g/t Au from 415m and 8m @ 11.8g/t Au from 478m.
GKD349: 12m @ 5.6g/t Au from 347m.
GKD351: 3m @ 8.2g/t Au from 544m, 3.5m @ 10.9g/t Au from 562m, 3m @ 57.0g/t from Au 590m, and 5m @ 36.2g/t Au from 612m.
GKD355A: 2m @ 12.2g/t Au from 347m, 3m @ 4.5g/t Au from 444m and 4m @ 3.9g/t Au from 469m.
GKD369: 17m @ 14.2g/t Au from 320m.
GKD371: 14m @ 18.8g/t Au from 125m.
GKD372: 6m @ 24.8g/t Au from 257m, 10m @ 5.6g/t Au from 290m, and 13m @ 16.1g/ t Au from 367m.
Figure - Gokona Deeps - Section 12,625mE (looking mine west) showing recent drill intercepts
[For picture see www.africanbarrickgold.com]
Nyabirama Resource Definition and Extension Drilling
The Nyabirama programme is aimed at defining underground potential from areaspreviously not able to be drilled from the open pit or during early explorationdrilling. During H1 2012, 5,479 metres of core drilling were completed bringingthe programme total to 35,660 metres. Assay results received during the halfcontinue to confirm the current resource interpretation, intersecting multiplehigh-grade gold zones within a broader 1g/t Au mineralised envelope. Based onthe drilling to date, and with a number of assays still to be received, weestimate an underground resource of 0.5Moz has been delineated and once allassays are received, we will incorporate the results into the scoping study.
Selected significant assay results during H1 2012 include:
NBD040: 3m @ 143.0g/t Au from 99m and 6m at 5.2g/t Au from 208m.
NBD042: 2m @ 14.1g/t from 84m, 5.60m at 2.6g/t from 122m and 5m at 3.4g/t from211m.NBD045: 1m @ 57.0g/t Au from 167m and 22m at 4.4g/t Au from 217m.
NBD048: 4m @ 76.3g/t from 93m, 3.6m at 12.0g/t from 440m and 4m at 13.3g/t from 484m.
NBD061: 3m @ 20.0g/t from 6m and 3m at 12.6g/t from 232m.
NBD068: 5m @ 10.2g/t Au from 159m, 6m @ 84.8g/t Au from 263 and 11m @ 6.3g/t Au from 366m.
NBD071: 2m @ 22.2g/t Au from 100m and 7m @ 23.3g/t Au from 200m.
NBD074: 9m @ 12.6g/t Au from 200.8m, 10.9m @ 29.3g/t Au from 237m and 4m @ 22.1g/t Au from 255m.
NBD085: 5m @ 19.3g/t Au from 39m, 2m @ 40.1g/t Au from 204m and 6m @ 13.8g/t Au from 333m.
The results received continue to show that mineralisation extends deeper than previously interpreted.
Figure - Nyabirama drill plan showing location of section 8350mE (below) and planned Nyabirama West holes
[For picture see www.africanbarrickgold.com]
Figure - Nyabirama Deeps cross section 8,350mE (looking mine west) showing recent drill results from infill drilling
[For picture see www.africanbarrickgold.com]
TULAWAKA
East Zone Underground Extensions
A total of 73 underground diamond core holes for 9,251 metres were drilledduring H1 2012 from four drill platforms located at Levels 11E (Zone 550), 9E(Zone 250), 10 DD1 and 10 Access (Zone 150) to test the Tulawaka East Zoneunderground extensions between Level 11 and Level 20 (160m to 400m below thecompleted pit floor).As a result, we were able to fully replace reserves mined in the first half of2012 and thereby have been able to extend the life of the mine into 2013.Diamond drilling continues to test depth, plunge and strike extensions of themineralised lodes between Levels 10 and 12, below current reserves in the EastZone and we remain confident in further extending the mine life.The majority of the holes drilled during the period returned patchy gradeswhich confirm the pinch and swell (boudinage) nature of the Tulawaka orebody.During the early part of the year, three of the holes drilled through Zone 550Ereturned promising high grades with visible gold in core between levels 11 and12. This re-emphasises the potential of high grade mineralisation at depth,within the 550 Zone even though holes around them did not show the sameconcentration of mineralisation.
Significant intersections made during the period include the following:
TUGD00427: 1.1m @ 9.8g/t Au.
TUGD00430: 2.2m @ 13.7g/t Au.
TUGD00437: 1.6m @ 120.0/t Au and 2m @ 34.8g/t Au.
TUGD00443: 0.9m @ 680.0g/t Au.
TUGD00470: 0.6m @ 11.5g/t Au.
TUGD00474: 3.5m @ 13.5g/t Au.
TUGD00511: 1.0m @ 12.0g/t Au.
Figure - Tulawaka long section showing reserve outline, planned drill programmes and recent assay results
[For picture see www.africanbarrickgold.com]
Though results received to date consist of narrow intercepts, they aresignificant in that they confirm the predicted continuity (at depth) of theorebody, within zones 150 and 250. The intersection of 1.0m @ 12.0g/t Au fromTUGD00511 is around Level 19 (850m RL) in zone 150. This, and the fact thathistorically, close spaced sampling has realised more ounces than the reserveestimates, provides a good indication of the resource potential at depth.
BULYANHULU
Bulyanhulu Upper East
During the first half of 2012, rehabilitation and dewatering work was completedon the decline to the Upper East Zone. The planned eleven geotechnical andmetallurgical test holes were completed with associated test work on the drillcore underway. Work on detailed execution design and execution procedures hasbeen completed in advance of the commencement of the test stope which isscheduled to take place in Q3 2012. In order to manage the test stope withsufficient expertise, additional experienced mining personnel have beencontracted to undertake the initial mining and training of the Bulyanhulustaff. Following completion of the test stope, Board approval will be sought tocommence development of the zone.In conjunction with the Reef 1 Upper East Zone feasibility work, we have alsobeen completing drilling to test the Upper East Zone on Reef 2. During H1 2012,52 reverse circulation (RC) holes were drilled for 4,847 metres targeting goldmineralisation at up to150 metres below surface. This relatively shallow RCdrilling intersected gold mineralisation that is consistent with Reef 2 stylemineralisation over a strike length of approximately 500 metres. At the end ofJune 2012 we commenced infill definition drilling on the Reef 2 Upper East Zonebetween 150m and 600m (vertically below surface) to allow investigation of thepotential to access Upper East Zone Reef 2 mineralisation in conjunction withReef 1. We anticipate completion of the infill definition drill programmeduring Q3 2012. Selected results from the shallow RC drilling programmeinclude:BGMRC0147: 4m @ 4.3g/t Au from 72m including 1m @ 12.7g/t Au from 97m.BGMRC0148: 3m @ 4.9g/t from 106m including 1m @ 11.6g/t Au from 106m.BGMRC0150: 5m @ 6.8g/t Au from 97m including 2m @ 14.7g/t Au from 97m.BGMRC0151: 7m @ 3.1g/t Au from 110m.BGMRC0157: 5m @ 8.8g/t Au from 86m including 3m @ 14.1g/t Au from 86m.
Figure - Bulyanhulu collar location plan and significant results for shallow reverse circulation drilling programme
[For picture see www.africanbarrickgold.com]
Bulyanhulu CIL Circuit Expansion
As announced in May 2012, we received Board approval to progress with theconstruction of the expansion of the new CIL circuit. The project will addproduction in excess of 40Koz Au per annum for the first six years of theproject from H1 2014 at a lower cost than the existing underground operations,and further incremental production for the remainder of the life of mine. Thepre-production capital costs of US$167 million for the project will be splitapproximately 30% in 2012 and 70% in 2013 and we continue to assess fundingoptions. We have selected a company to execute the project based on an EPCcontract and expect to complete contract negotiations in Q3 2012. Parallel tothe detailed design, early works related to site preparation and infrastructurefor the construction activities are ongoing.
Golden Ridge
We continue to evaluate the various scenarios for developing the resource atGolden Ridge, including processing the ore at Bulyanhulu. Based on the outcomesfrom the value engineering programme in 2011 and as a part of the revisedfeasibility study, we are undertaking further geo-metallurgical test work,which is 50% complete. The work programme is expected to be completed by theend of H2 2012. In parallel to the technical work, conceptual work continues toassess environmental and social requirements for the project.
GREENFIELD PROJECTS
Nyanzaga Project
At the Nyanzaga Project, an initial in-pit resource of 4.1Moz Au, consisting of3.5Moz at 1.47g/t Au Indicated and 0.6Moz at 2.05g/t Au Inferred was releasedin January 2012. This represented a fourfold increase on the previouslydeclared resource of 0.3Moz Indicated and 0.6Moz Inferred. Subsequently, inApril 2012, we announced the resource had increased by a further 0.5Moz,through the inclusion of Kilimani near surface mineralisation and additionalmaterial at depth, and is now in excess of 4.6Moz Au, consisting of 3.75Moz at1.42g/t Au Indicated and 0.85Moz at 1.81g/t Au Inferred. The updated modellingnow confirms the opportunity to exploit the Tusker and Kilimani mineralisedzones in a single open pit. The project is expected to move into thepre-feasibility study stage in H2 2012.During the first half of 2012 the main focus on the project was to completegeotechnical, metallurgical and hydrological drilling, sampling and technicalstudies to assist with modelling of the Nyanzaga ore body and open pitscenarios. A total of 26 reverse circulation and diamond core holes weredrilled for 8,802 metres, and all drilling and sampling programmes werecompleted on schedule, with the technical review of data ongoing at the end ofJune. Preliminary geotechnical studies are complete and were positiveindicating the average pit wall angles can be steepened which will result in areduction in the strip ratio. Likewise, metallurgical testwork is in line withexpectations, indicating recoveries in oxidised and transitional material ofgreater than 94% and in fresh rock between 86% and 92% with standard CILprocessing, and as results are received they are being fed into thegeometallurgical model.
At Kilimani, two hydrological holes as part of the scoping study work returned significant results from shallow depths including intersections of:
NYZRCDDHY0006: 2m @ 22.8g/t Au from 23m.
NYZRCDDHY0011: 24m @ 1.3g/t Au from 4m.
In addition to the resource upgrade and ongoing drilling for the technicalstudies, we continued to receive encouraging assay results for infill andstep-out drilling during H1 2012 that show excellent continuity when comparedto the broader spaced drilling. A total of 50 reverse circulation and diamondcore holes were drilled, totalling 13,931 metres during the first half of 2012.Results from H1 2012 include intersections of:
NYZRCDD0506: 307m @ 1.6g/t Au from 218m, including 3m @ 64.7g/t Au from 441m.
NYZRCDD0509: 345m @ 1.5g/t Au from 329m, including 16m @ 5.4g/t Au from 532m.
NYZRCDD0510: 150m @ 2.7g/t Au from 262m, including 13m @ 20.2g/t Au from 392m and 135m @ 2.6g/t Au from 448m, including 14m @ 9.3g/t Au from 459m.
NYZRCDD0512: 244m @ 1.3g/t Au from 244m and 159m at 2.1g/t Au from 515m, including 9m at 9.0g/t Au from 524m.
NYZRCDD0514: 102m @ 1.8g/t Au from 343m, including 10m @ 4.0g/t Au from 358m.
Additionally, at the Kilimani prospect, infill drilling continued to confirmthe width, grade and tenor of gold mineralisation within the near-surface zonefrom the historical broader-spaced drilling. During H1 2012, drill testing ofextensions to the Kilimani Zone in the southeast, outside of the currentresource area, identified near-surface gold mineralisation, including selectedresults:
NYZRC0558: 2m @ 1.9g/t Au from 148m.
NYZRC0559: 9m @ 1.2g/t Au from 73m.
NYZRC0560: 27m @ 1.9g/t Au from 10m.
The principal objectives of the ongoing exploration drill programmes are toexpand the global resource through delineating strike and down-dip extensionsto the Tusker and Kilimani mineralised zones, as well as identifying new zonesof gold mineralisation adjacent to the current resource area and potentialsatellite deposits within 15km of the Nyanzaga resource. Regional explorationwork is focused on the Kasubuya property approximately 12-15km southwest of,and contiguous with, the Nyanzaga property. The current programmes at Kasubuyaare mapping and rock chip sampling of several multi-kilometre gold anomaliesassociated with sulphidised banded iron formations, with the aim of advancingthe highest priority targets to drill testing stage during the second half of2012.
Figure - Nyanzaga (Tusker and Kilimani Zones) drill location plan with the recent 2011 and 2012 holes shown separately
[For picture see www.africanbarrickgold.com]
Figure - Nyanzaga section 2320mN
[For picture see www.africanbarrickgold.com]
Dett
The Dett prospect lies in the western part of the Mara-Musoma Greenstone Beltand is located approximately 65 kilometres north east of North Mara gold mine.During the first half of 2012, a desktop analysis has continued ahead of theplanned drill programme in the third quarter which will target furthervalidating and extending the higher grade gold zones and investigating thepotential of delineating a large, in excess of 1.0 - 1.5g/t Au, mineableresource.
Financial Update
The following review provides an analysis of our consolidated results for thesix months ended 30 June 2012 and the main factors affecting financialperformance. It should be read in conjunction with the financial statements andaccompanying notes on pages 34 to 48, which have been prepared in accordancewith International Financial Reporting Standards as adopted for use in theEuropean Union ("IFRS").
Revenue
Revenue for the six months of US$534.5 million was 8% lower than the prior yearperiod of US$578.4 million. The decrease in group gold sales volume of 58,822ounces was the primary reason for lower revenue and resulted mainly from thelower production base, as well as the higher number of on hand ounces sold in2011. The lower volume impact was partially offset by the increase in theaverage realised gold price to US$1,642 per ounce in the first half of 2012compared to US$1,461 in 2011. Gold revenue amounted to US$510.0 millioncompared to US$539.5 million in 2011.Co-product revenue is included in total revenue and amounted to US$24.5 millionfor the first half of the year, a decrease of 37% from the prior year ofUS$38.9 million. The decrease was primarily driven by reduced copper volumessold due to a lower production base at Buzwagi and lower grades at Bulyanhulu.Also, negative price variances due to global economic factors resulted in adecrease in the H1 2012 average realised copper price of US$3.53 per poundcompared to the prior year of US$4.20.
Cost of sales
Cost of sales was US$387.0 million for the six months ended 30 June 2012, representing an increase of 12% from the prior year period of US$344.6 million. The key aspects that impacted cost of sales during the year were:
- higher energy costs due to increased fuel usage, driven by the requirementto self generate power as well as higher volumes milled, in combination with ahigh oil price environment during the first half of the year and increasedTanesco (the national Tanzanian electricity supplier) power tariffs;
- the higher inflationary environment that increased the cost of both international and national labour, the higher cost of renewing contractor services and significant increases in commodity inputs for key operating consumables which was partially offset by lower milling and mining activity levels compared to plan; and
- increased maintenance costs due to the change to an ownership model from a maintenance and repair contractors ("MARC") model at North Mara where these costs were previously reflected in contracted services, increased plant maintenance at North Mara, Bulyanhulu plant efficiency focus, the focus on addressing mining equipment availability and plant downtime concerns at Buzwagi, and the effect of power disruptions resulting in plant equipment failure due to wear.
Cost of sales for H1 2012 was negatively impacted by a reduction in capitalisedwaste stripping costs due to constrained mining resulting in lower strip ratioscompared to plan.Royalties included in revenue related costs increased on the prior year despitesignificantly lower sales volumes driven by the increase in the governmentroyalty (from 3% to 4%) from May 2012 and higher realised prices. This waspartially offset by lower third party smelting fees. Depreciation andamortisation was US$70.5 million for the first half of the year representing anincrease of 11% from the prior year period (US$63.4 million). This increase wasdriven by a higher capital investment base employed and depreciated in 2012partially offset by a lower production base.
The table below provides a breakdown of cost of sales:
Three months ended Six months ended (US$'000) 30 June 30 June (Unaudited) 2012 2011 2012 2011 Cost of Sales Direct mining costs 149,196 128,870 287,423 252,144 Third party smelting and refining fees 5,729 6,014 9,663 11,266 Royalty expense 10,329 9,614 19,423 17,875
Depreciation and amortisation 35,905 31,989 70,472
63,354 Total 201,159 176,487 386,981 344,639 The consolidated direct mining expenses totalled US$287.4 million for the sixmonth period. This represents an increase of 14% from the prior year ofUS$252.1 million. The key reasons for the increase can be attributed to anoverall increase in the operating costs of operations. A detailed breakdown ofdirect mining expenses is shown in the table below. Three months ended Six months ended 30 June 30 June (US$'000) 2012 2011 2012 2011 Direct mining costs Labour 41,939 41,625 87,764 81,992 Energy and fuel 33,843 24,942 67,975 47,494 Consumables 25,829 21,535 51,848 46,037 Maintenance 23,498 17,334 49,512 35,602 Contracted services 22,483 23,563 41,785 50,058 General administration costs 21,413 19,632 44,291 34,078 Capitalised mining costs (19,809) (19,761) (55,752) (43,117) Total direct mining costs 149,196 128,870 287,423 252,144
Individual cost components comprised:
Labour costs were 7% higher than the first half of 2011 driven predominantly by inflationary increases passed on through the Q4 2011 annual salary increase process and increased headcount.
Energy and diesel fuel expenses account for all electricity, diesel fuel andoil/lubricant expenditures. The 43% increase over the first half of 2011reflects mainly the utilisation of diesel spinning and back-up generated powerin order to ensure stable and consistent power supply because of thedifficulties in sourcing from the national power grid at Buzwagi in combinationwith a high oil price environment. Furthermore, Bulyanhulu showed an increasedriven by a combination of higher Tanesco tariffs and the requirement to selfgenerate. The cost per barrel of Brent crude oil, the key input of diesel,remained fairly in line at an average of US$111/bbl in H1 2011 to US$114/bbl inH1 2012.Consumable costs increased 13% mainly due to a combination of inflationarypressure and the increased usage of in-process reagents to maintain recoveriesthroughout our operations. At Buzwagi, a large proportion of talc minerals wereprocessed requiring additional reagents to maintain recovery levels and preventrecovery losses. Processing of coarser crushed material also increased theusage of grinding media.
Maintenance costs rose 39% primarily due to the change to an ownership model at North Mara, increased plant maintenance at North Mara, Bulyanhulu plant efficiency focus, the focus on addressing mining equipment availability and plant downtime at Buzwagi, and the effect of power disruptions resulting in plant equipment failure due to wear.
Contracted services decreased 17%, mainly as a result of decreased MARC costs at North Mara and lower drilling costs at North Mara and Buzwagi due to decreased drilling activity.
General and administrative costs increased by 30%, mainly driven by increasedwarehousing and logistics costs associated with increased inventory levelrequirements and freight increases; increased camp costs due to increasedheadcount and inflationary increases from contractors; increased aviation costsdriven by the use of charters; and increased general site maintenance.Capitalised direct mining costs were 29% higher than H1 2011 and can be splitprimarily between the change in gold inventory and capitalised underground andwaste stripping cost. Capitalised underground and waste stripping amounted toUS$42.6 million in H1 2012 compared to US$40.6 million in H1 2011. Capitalisedwaste stripping at North Mara was lower due to a lower strip ratio (strip ratioof 9.1 for H1 2012 compared to 12.1 for H1 2011) which was partially offset byincreased stripping at Buzwagi. Capitalised underground development atBulyanhulu increased due to higher direct mining costs and an increase in thecapitalisation ratio.For the first six months of 2012, US$11.2 million was capitalised to goldinventory primarily driven by Buzwagi ore capitalisation as a result of minedtonnes exceeding processed tonnes in combination with a higher average costingallocation caused by the increased cost profile. This was in part offset by theabsorption of finished gold on hand sold in excess of production and North Maralower grade ore stockpiles processed to supplement limited ore mined. In thefirst half of 2011, 11,141 ounces of finished gold ounces on hand were sold inexcess of production resulting in a net capitalisation of US$0.5 million.
Corporate administration costs
Corporate administration expenses totalled US$25.6 million for the six monthsended 30 June 2012. This equated to a 25% increase from the prior year periodof US$20.5 million. Corporate administration costs comprise the expensesassociated with maintaining the corporate company functions located in the Dares Salaam, Johannesburg and London offices. Costs include salaries, officerent, consulting, legal, audit fees and investor relations expenses. Theincrease is attributable to a one time adjustment in 2011 that reduced costsrelating to an employee share based payment scheme due to forfeitures and theinclusion of US$2.6 million for continuous improvement projects in H1 2012.
In general, inflationary pressures and increased headcount have been offset by the positive impact of a weakened rand at the Johannesburg office.
Exploration and evaluation costs
Exploration and evaluation costs are incurred to advance the exploration at ourgreenfield projects and also includes exploration overheads and technicalevaluation costs. For H1 2012, US$10.4 million was incurred, 35% lower thanthe US$16.1 million spent in H1 2011. The increased expenditure in the firstsix months of 2011 was due to attention being focused on the Nyanzaga projectwhich resulted in a fourfold increase of the in-pit resource in January 2012with a further increase announced during the first quarter of the current year.We continue to advance exploration drilling at Nyanzaga while capitalisingcosts associated with the existing scoping study in respect of the existingresource.Where it is probable that resources at adjacent reserve areas will be convertedinto reserves, the expenditure is capitalised prospectively. During the firstsix months of 2012, an amount of US$9.5 million of exploration costs wascapitalised compared to US$8.4 million in the corresponding period in 2011.Capitalised costs predominantly relate to the Gokona and Nyabirama undergrounddrilling projects at North Mara and geotechnical, metallurgical andhydrological drilling as part of the scoping study at Nyanzaga.
Corporate social responsibility expenses
Corporate social responsibility expenses incurred amounted to US$6.8 millionfor the year compared to the prior year of US$1.4 million. The increase hasbeen driven by larger contributions to general community projects funded fromthe ABG Maendeleo Fund (which was launched in September 2011) and general siteprojects and overheads.Other charges
Other charges amounted to US$4.3 million for the period, 70% down from the H12011 amount of US$14.2 million. Other charges comprise mostly one-off costs andinclude foreign exchange gains and losses, gains and losses on disposals,unrealised gains and losses on derivative contracts, asset write downs andcertain provision movements. The main contributors to the net expense were: (i)derivative losses of US$3.0 million (gain of US$2.2 million in 2011); (ii)historical supply writedowns of US$1.7 million (US$0 million in 2011); (iii)legal fees incurred of US$0.8 million (US$0 million in 2011); (iv) disallowedindirect tax claims of US$0.4 million (US$3.2 million in 2011); and (v) baddebt writedowns on supplier backcharge receivables of US$0.5 million (US$0million in 2011). This was offset by net foreign exchange gains given thestrengthening of the Tanzanian shilling of US$2.3 million (loss of US$12.5million in 2011) and the gain on disposal of property, plant and equipment ofUS$2.3 million (US$0 million in 2011).
Finance expense and income
The finance expense increased to US$4.7 million for the first half of the year,compared to US$4.1 million in H1 2011. The key drivers were increased accretionexpenses relating to the discounting of the environmental rehabilitationliability and interest payable on finance leases. This was offset by financecharges of US$1.5 million (US$2.4 million in 2011) relating to the revolvingcredit facility agreement which has been extended until 2014 resulting in alower monthly interest amortisation charge. Currently, ABG has no externaldebt.
Finance income relates predominantly to interest charged on non-current receivables and interest received on time deposits.
Taxation matters
The taxation expense decreased to US$31.3 million for the period, compared toUS$54.0 million in H1 2011. The H1 2012 expense consists of current corporatetax of US$0.7 million and deferred tax of US$30.6 million. The decreased taxexpense was driven by lower profits before tax, predominantly due to lowerrevenue and increased costs. The effective tax rate in H1 2012 increased to 32%from 30% in H1 2011, and is mainly driven by tax losses on which deferred taxassets are not recognised.Consistent with the terms of the Memorandum of Settlement which allows ABG tooffset income tax payable against outstanding refunds for VAT and fuel levies,the corporate tax liability relating to Tulawaka of US$0.6 million was offsetagainst amounts owed to ABG, leaving a net discounted receivable of US$77.2million as part of the settlement.
Net profit for the period
As a result of the factors discussed above, net profit for the six months ended30 June 2012 was US$65.5 million. This represents a decrease of 47% from theprior year period (US$124.2 million). The key driver was decreased revenue as aresult of lower sales ounces partially offset by an increase in realised goldprices. This was further impacted by increases in our cost base, increasedcorporate administration and corporate social responsibility expenses, in partoffset by decreased taxation due to the lower profit before tax, other chargesand exploration and evaluation costs.
Key financial performance indicators and reconciliations
Cash Costs
With respect to our cash costs per ounce sold for the year, we saw a 43%increase from the comparable period in 2011 to US$938 per ounce sold fromUS$655 per ounce sold. Refer to the current operations overview on page 2 andcost of sales explanations as part of the financial review detailing the yearon year change.
The table below provides a reconciliation between cost of sales and total cash cost to calculate the cash cost per ounce sold.
Three months ended Six months ended (US$'000) 30 June 30 June (Unaudited) 2012 2011 2012 2011 Total cost of sales 201,159 176,487 386,981 344,639 Deduct: depreciation and amortisation (35,905) (31,989) (70,472) (63,354) Deduct: co-product revenue (12,270) (19,401) (24,501) (38,883) Total cash cost 152,984 125,097 292,008 242,402 Total ounces sold¹ 160,029 191,830 310,516 369,338
Consolidated cash cost per ounce 956 652 940
656 Equity ounce adjustment² (6) 0 (2) (1)
Attributable cash cost per ounce 950 652 938
655
1Reflects 100% of ounces sold.
2Reflects the adjustment for non-controlling interests at Tulawaka.
EBITDA
EBITDA for the six months ended 30 June 2012 decreased by 30% to US$170.9million compared to the prior year period of US$244.9 million as a result ofthe lower revenue base. Furthermore, cost of sales increased drivenpredominantly by increased direct mining costs across all sites, as well asincreased royalty costs. Note that EBITDA includes the impact of other chargestotalling US$4.3 million which includes one-off expenditures. A reconciliationbetween net profit for the period and EBITDA is presented below: Three months ended Six months ended (US$000) 30 June 30 June (Unaudited) 2012 2011 2012 2011 Net profit for the period 29,082 72,419 65,522 124,230 Plus: income tax expense 14,829 33,862 31,335 54,031
Plus: depreciation and amortisation 35,905 31,989
70,472 63,354 Plus: finance expense 2,378 2,239 4,689 4,121 Less: finance income (813) (437) (1,079) (809) EBITDA 81,381 140,072 170,939 244,927 Basic earnings per share
Earnings per share for the six months ended 30 June 2012 amounted to US15.9 cents, a decrease of 46% from the prior year period of US29.3 cents. The decrease was driven by lower net profit for the period and there was no change in the underlying issued shares.
Cash flow Three months ended Six months (US'$000) 30 June 30 June (Unaudited) 2012 2011 2012 2011
Cash flow from operating activities 54,783 99,450 110,309
186,134
Cash used in investing activities (77,022) (63,800) (131,093)
(116,108)
Cash used in financing activities (56,273) (13,770) (60,767)
(15,205) (Decrease)/Increase in cash (78,512) 21,880 (81,551) 54,821
Foreign exchange difference on cash 1,170 (620) 1,064
(756) Opening cash balance 581,009 433,817 584,154 401,012 Closing cash balance 503,667 455,077 503,667 455,077
Cash flow from operating activities was US$110.3 million for the six monthsended 30 June 2012, a decrease of US$75.8 million. The decrease primarilyrelated to decreased EBITDA of US$74.0 million. Net working capital movementsremained similar to the comparative period and the US$63.0 million outflowrelated to: increased investment in supplies inventory of US$38.5 million givenmining constraints, plant downtime and increased general maintenance suppliesgiven breakdowns; an increase in ore inventory of US$12.2 million which wasprimarily driven by higher mining costs; and a decrease in trade and otherpayables of US$9.9 million mainly due to timing differences in payments. Thiswas offset by a reduction in trade receivables (US$6.4 million).Cash flow used in investing activities was US$131.1 million for the six monthsended 30 June 2012, an increase of 13% from the prior year of US$116.1 million.Total cash capital expenditure for the year of US$118.7 million remained inline with the prior year figure of US$117.1 million.A breakdown of total capital and other investing capital activities is providedbelow: Six months ended 30 June (US$'000) (Unaudited) 2012 2011 Sustaining capital 65,510 57,428 Expansionary capital 10,639 19,035 Capitalised development1 42,600 40,608 Total cash capital 118,749 117,071 Rehabilitation asset adjustment 4,534 1,595 Non-cash sustaining capital2 1,623 - Total capital expenditure 124,906 118,666 Other investing capital Non-current asset movement3 15,083 643
1 The prior year capital expenditure breakdown has been restated to separately reflect capitalised development.
2 Total non-cash sustaining capital relates to the capital finance lease at Buzwagi for the drill rigs.
3 Non-current asset movement relates to the investment in land acquisitions reflected as prepaid operating leases; village housing project; and other items.
Sustaining capital
Sustaining capital expenditure includes investment in the mining equipmentfleet at Buzwagi (US$8.9 million), Bulyanhulu (US$4.5 million) and North Mara(US$2.7 million); investment in continuous improvement systems relating toNorth Mara, Buzwagi and Bulyanhulu (US$7.4 million); process plant investmentsat Buzwagi (US$7.9 million) and Bulyanhulu (US$1.2 million); the watertreatment plant at North Mara (US$1.6 million); and investment ininfrastructure across all sites (US$11.6 million).
Expansionary capital
Expansionary capital expenditure includes capitalised exploration drilling atNorth Mara (US$4.6 million) and Tulawaka (US$1.9 million); investment in theTulawaka underground Eastern portal extension (US$1.9 million) and the processplant expansion and redesign project at Bulyanhulu (US$0.9 million).
Capitalised development
Capitalised development include capitalised waste stripping at North Mara (US$8.2 million) and Buzwagi (US$8.7 million); and capitalised underground development expenditure at Bulyanhulu (US$22.1 million) and Tulawaka (US$3.6 million).
Non-cash capitalNon-cash capital for the period relates to the rehabilitation asset adjustmentreflecting the impact of the change in discount rates relating to the estimatedfuture reclamation liability across all sites (US$4.5 million) and investmentin drill rigs under a finance lease at Buzwagi (US$1.6 million).
Other investing capital
Other investing capital for the period includes US$13.4 million relating to land purchases at North Mara which is included in long term prepayments.
Cash used in financing activities
Cash used in financing activities for the six months ended 30 June 2012 of US$60.8 million increased from the prior year of US$15.2 million. The 2011 final dividend totalled US$53.7 million and was paid during the period. Finance lease instalments amounted to US$3.7 million and distributions to non-controlling interests amounted to US$3.3 million.
Financial Position
At 30 June 2012, ABG had cash and cash equivalents of US$503.7 million(US$584.2 million at 31 December 2011). The Group's cash and cash equivalentsare with counterparties whom the Group considers to have an appropriate creditrating. Location of credit risk is determined by physical location of the bankbranch or counterparty. The maximum allowable term of maturity for anyindividual security is 12 months. Investment counterparties must have a creditrating of at least Baa2 or better by Moody's Investor Services or BBB byStandard and Poor's. No more than 25% of the aggregate market value of theinvestment portfolio is maintained in any one country, with the exception ofthe United States of America, United Kingdom and Barbados, or in any oneindustry group. Investments are held mainly in United States dollars and cashand cash equivalents in other foreign currencies are maintained for operationalrequirements.Debt remained at zero, as in 2011. The revolving credit facility of US$150million remains in place. The facility has been provided to service the generalcorporate needs of the Group and to fund potential acquisitions. All provisionscontained in the credit facility documentation have been negotiated on normalcommercial and customary terms for such finance arrangements. The term of thefacility has been extended to 2014 and when drawn, the spread over LIBOR willbe 350 basis points. At 30 June 2012, none of the funds were drawn under thefacility.
Goodwill and intangible assets remained in line with levels as at 31 December 2011.
The net book value of property, plant and equipment increased from US$1.8 billion at the end of 2011 to US$1.9 billion in H1 2012. The main capital expenditure drivers have been explained in the cash flow used in investing activities section above, and have been offset by depreciation charges of US$75.2 million.
Total indirect tax receivables, net of a discount provision applied to thenon-current portion, increased from US$85.3 million at the end of 2011 toUS$87.4 million in 2012. The increase was mainly due to indirect taxes incurredin the normal course of business, and was impacted by the offset of corporatetax payable at Tulawaka of US$0.6 million for the six month period.The net deferred tax position increased from a net deferred tax liability ofUS$94.0 million at the end of 2011 to a net deferred tax liability of US$124.6million in H1 2012. This was driven by the taxable income generated during thefirst half of 2012.
Net assets attributable to owners of the parent remained in line at US$2.8 billion when compared to 31 December 2011. Profits attributable to owners of the parent of US$65.2 million was offset by the payment of the final 2011 dividend of US$53.7 million to shareholders in May 2012.
Dividend
An interim dividend of US4.0 cents per share has been declared and will be paid to shareholders on 24 September 2012 (refer page 3).
Significant judgements in applying accounting policies and key sources of estimation uncertainty
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, thesignificant judgements made by management in applying the group's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied to the consolidated financial statements for the year ended 31December 2011, with the exception of changes in estimates that are required indetermining the provision for income taxes (see Note 4 of the financialstatements).
Going concern statement
The ABG Group's business activities, together with factors likely to affect itsfuture development, performance and position are set out in the operational andfinancial review sections of this report. The financial position of the ABGGroup, its cash flows, liquidity position and borrowing facilities aredescribed in the preceding paragraphs of this financial review.In assessing the ABG Group's going concern status the Directors have taken intoaccount the above factors, including the financial position of the ABG Groupand in particular its significant cash position, the current gold and copperprice and market expectations for the same in the medium term, and the ABGGroup's capital expenditure and financing plans. After making appropriateenquiries, the Directors consider that ABG and the ABG Group as a whole hasadequate resources to continue in operational existence for the foreseeablefuture and that it is appropriate to adopt the going concern basis in preparingthe financial statements.Non-IFRS MeasuresABG has identified certain measures in this report that are not measuresdefined under IFRS. Non-IFRS financial measures disclosed by management areprovided as additional information to investors in order to provide them withan alternative method for assessing ABG's financial condition and operatingresults. These measures are not in accordance with, or a substitute for, IFRS,and may be different from or inconsistent with non-IFRS financial measures usedby 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:
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 includeall 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 fromnon-hedge currency and commodity contracts, depreciation and amortisation andsocial development costs. Cash cost is calculated net of co-product revenue.The presentation of these statistics in this manner allows ABG to monitor andmanage those factors that impact production costs on a monthly basis. ABGcalculates cash costs based on its equity interest in production from itsmines. Cash costs per ounce sold are calculated by dividing the aggregate ofthese costs by gold ounces sold. Cash costs and cash costs per ounce sold arecalculated on a consistent basis for the periods presented. Refer to page 25 aspart of the financial review section 10 for a reconciliation of cost of salesto cash costs.
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 beconsidered in isolation or as a substitute for measures of performance preparedin accordance with IFRS. EBITDA excludes the impact of cash costs of financingactivities and taxes, and the effects of changes in operating working capitalbalances, and therefore is not necessarily indicative of operating profit orcash flow from operations as determined under IFRS. Other companies maycalculate EBITDA differently. Refer to page 25 as part of the financial reviewsection 10 for a reconciliation of net profit to EBITDA.
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 andthe inventory purchase accounting adjustments at ABG's producing mines. ABGcalculates amortisation and other costs based on its equity interest inproduction from its mines. Amortisation and other costs per ounce sold iscalculated by dividing the aggregate of these costs by ounces of gold sold.Amortisation and other cost per ounce sold are calculated on a consistent basisfor the periods presented.Cash cost per tonne milled is a non-IFRS financial measure. Cash costs includeall 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 fromnon-hedge currency and commodity contracts, depreciation and amortisation andsocial development costs. Cash cost is calculated net of co-product revenue.ABG calculates cash costs based on its equity interest in production from itsmines. Cash costs per tonne milled are calculated by dividing the aggregate ofthese costs by total tonnes milled.
Cash margin is a non-IFRS financial measure. The cash margin is the average realised gold price per ounce sold less the cash cost per ounce sold.
Operating cash flow per share is a non-IFRS financial measure and is calculatedby dividing Net cash generated by operating activities by the weighted averagenumber 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 wasteâ€"toâ€"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.
Cash operating cost per ounce - measures the total direct cash cost attributable to producing an ounce. It reflects cash costs adjusted to exclude royalties on an ounce basis.
Principal Risks and Uncertainties
There are a number of potential risks and uncertainties which could have amaterial impact on the ABG Group's performance over the remaining six months ofthe financial year and could cause actual results to differ materially fromexpected and historical results. The Directors do not consider that theprincipal risks and uncertainties have changed significantly since thepublication of the annual report for the year ended 31 December 2011. As suchthese risks continue to apply to the Group for the remaining six months of thefinancial year.
The principal risks and uncertainties disclosed in the 2011 annual report were categorised as:
- Single country risk: In order to ensure continued growth, we need to identifynew resources and development opportunities through exploration and acquisitiontargets outside of Tanzania.
- Reserves and resources estimates: Our stated mineral reserves and resources are estimates based on a range of assumptions, including geological, metallurgical and technical factors; there can be no assurance that the anticipated tonnages or grades will be achieved.
- Commodity prices: Our financial performance is highly dependent upon the price of gold and, to a lesser extent, the price of copper and silver. The prices of these commodities are affected by a number of factors beyond our control. Rapid fluctuations in pricing of these commodities will have a corresponding impact on our financial position.
- Cost and capital expenditure: We operate a cyclical business where fluctuations in operating cash flow and capital expenditure may adversely affect our financial position. In addition, industry cost pressures, notably as regards labour, capital equipment and energy may affect our cash flow and capital expenditure.
- Political, legal and regulatory developments: Changes to existing law andregulations in jurisdictions where we operate, or more stringent application orinterpretation of current laws and regulations by relevant governmentauthorities, could adversely affect our operations and development projects. Inparticular, our operations and financial condition may be adversely affected bylegal and regulatory changes and developments in Tanzania, or if our mineraldevelopment agreements (MDAs) are not honoured by the Tanzanian government. Wemay also be adversely affected by changes in global economic conditions,political and/or economic instability in Tanzania or any of its surroundingcountries.- Taxation reviews: Our financial condition may be adversely affected in theevent of the introduction of revised royalty or corporate tax regimes inTanzania that go beyond agreements contained in our MDAs. Our financialcondition may also be adversely affected if we are unsuccessful in our currentappeals and/or discussions with the TRA regarding outstanding tax assessmentsand unresolved tax disputes.
- Utilities supply: Power stoppages, fluctuations and disruptions in electrical power supply or other utilities could adversely affect our operations and financial condition. In addition, increases in power costs would make production more costly and alternative power sources may not be available.
- Community relations: A failure to adequately engage or manage relations withlocal communities and stakeholders could have a direct impact on our ability tooperate.- Variations to production and cost estimates: Our actual production and costsmay vary from estimates of future production, cash costs and capital costs fora variety of reasons, including actual ore mined varying from estimates ofgrade, tonnage, dilution and metallurgical and other characteristics;short-term operating factors relating to ore reserves; revisions to mine plans;risks and hazards associated with mining; natural phenomena; unexpected labourshortages or strikes; delays in permitting and licensing processes; and thetimely completion of expansion projects, including land acquisitions requiredfor the expansion of our operations from time to time. Costs of production mayalso be affected by a variety of factors, including: changing waste-to-oreratios; ore grade metallurgy; labour costs; the cost of commodities; generalinflationary pressures; and currency exchange rates. Failure to achieveproduction or cost estimates or material increases in costs could have anadverse impact on our future business, cash flows, profitability, results ofoperations and financial condition.- Loss of critical processes: Our mining, processing, development andexploration activities depend on the continuous availability of our operationalinfrastructure, in addition to reliable utilities and water supplies and accessto roads. Any failure or unavailability of operational infrastructure, forexample through equipment failure or disruption, could adversely affectproduction output and/or impact exploration and development activities.Deficiencies in core supply chain availability could also adversely affect ouroperations.- Environmental hazards and rehabilitation: Our activities are subject toenvironmental hazards as a result of processes and chemicals used in extractionand production methods and we may be liable for losses and costs associatedwith environmental hazards at our operations. We may also have our licences andpermits withdrawn or suspended as a result of such hazards, or may be forced toundertake extensive clean-up and remediation action. Any such action could havea material adverse effect on our business, operations and financial condition.- Employees, contractors and industrial relations: Our business significantlydepends upon our ability to recruit and retain qualified personnel, the loss ofwhich may negatively impact our ability to operate. Our business also dependson good relations generally with our employees and employee representativegroups, such as trade unions. A breakdown in these relations could result in adecrease in production levels and/or increased costs, which in turn could havea material adverse effect on our business. In addition to employees, ABGdepends on certain key contractors. Interruptions in contracted services couldresult in production slowdowns and/or stoppages.
- Security, trespass and vandalism: We face certain risks in dealing with trespass, theft, corruption and vandalism at our mines and unauthorised small-scale mining in proximity to and on specific areas covered by our exploration and mining licences may have an adverse effect upon our operations and financial condition.
- Health and safety, infectious diseases: A wide range of occupational healthdiseases, such as noise-induced hearing loss and lung diseases, pose a risk toour workforce. In addition, tropical and infectious diseases, such as malariaand HIV/AIDS, pose significant health risks to our employees, due to theepidemic proportions that such diseases may have in areas in which we operate.The potential liabilities related to such diseases and the impact that thesediseases may have on our workforce may have an adverse effect on our operationsand financial condition.
Further information regarding these risks and uncertainties can be found on pages 74 to 77 of the 2011 Annual Report which is available at www.africanbarrickgold.com.
Statement of Directors' Responsibility
The Directors confirm that, to the best of their knowledge, the condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union. The half-year management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R and Disclosure and Transparency Rule 4.2.8R, namely:
§ an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated interim financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
§ material related-party transactions in the first six months of the financialyear and any material changes in the related party transactions described inthe last Annual Report.
A list of current Directors is maintained on the African Barrick Gold plc Group website: www.africanbarrickgold.com.
By order of the Board
Greg Hawkins Kevin Jennings
Chief Executive Officer Chief Financial Officer
23 July 2012Auditor's Review Report Independent review report to African Barrick Gold plc
Introduction
We have been engaged by the company to review the condensed consolidatedinterim financial information in the half-yearly financial report for the sixmonths ended 30 June 2012, which comprises the Consolidated Income Statement,Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet,Consolidated Statement of Changes in Equity, Consolidated Statement of CashFlows and related notes. We have read the other information contained in thehalf-yearly financial report and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedconsolidated interim financial information.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial information included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensedconsolidated interim financial information in the half-yearly financial reportbased on our review. This report, including the conclusion, has been preparedfor and only for the company for the purpose of the Disclosure and TransparencyRules of the Financial Services Authority and for no other purpose. We do not,in producing this report, accept or assume responsibility for any other purposeor to any other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed consolidated interim financial information in thehalf-yearly financial report for the six months ended 30 June 2012 is notprepared, in all material respects, in accordance with International AccountingStandard 34 as adopted by the European Union and the Disclosure andTransparency Rules of the United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants, London23 July 2012
Notes:
The maintenance and integrity of the African Barrick Gold website is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the financialstatements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
FINANCIAL STATEMENTS
Consolidated Income Statement
For the year ended For the six months 31 Notes ended 30 June December (Unaudited) (Unaudited) (Audited) (in thousands of United States dollars) 2012 2011 2011 Revenue 534,467 578,387 1,217,915 Cost of sales (386,981) (344,639) (704,114) Gross profit 147,486 233,748 513,801 Corporate administration (25,609) (20,525) (50,505) Exploration and evaluation costs (10,385)
(16,078) (30,339)
Corporate social responsibility expenses (6,750) (1,372) (7,376) Other charges 6 (4,275) (14,200) (15,639) Profit before net finance expense and taxation 100,467 181,573 409,942 Finance income 7 1,079 809 1,484 Finance expense 7 (4,689) (4,121) (8,725) (3,610) (3,312) (7,241) Profit before taxation 96,857 178,261 402,701 Tax expense 8 (31,335) (54,031) (117,924) Net profit for the period 65,522 124,230 284,777 Profit attributable to: - Non-controlling interests 370 4,096 9,882 - Owners of the parent 65,152 120,134 274,895 Earnings per share:
- Basic earnings per share (cents) 9 15.9
29.3 67.0
- Diluted earnings per share (cents) 9 15.9
29.3 67.0
Consolidated Statement of Comprehensive Income
For the year For the six months ended 31 ended 30 June December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012 2011
2011 Net profit for the period 65,522 124,230 284,777
Other comprehensive expenses for the period (222) -
-
Total comprehensive income for the period 65,300 124,230
284,777 Attributed to:
- Non-controlling interests 370 4,096
9,882 - Owners of the parent 64,930 120,134 274,895 The notes on pages 38-48 form an integral part of this financial information.Consolidated Balance Sheet As at As at Notes 30 June 31 December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012 2011 2011 ASSETS Non-current assets Goodwill and intangible assets 258,513 258,513 258,513 Property, plant and equipment 11 1,871,524 1,673,481 1,823,247 Deferred tax assets 23,186 89,908 55,529 Non-current portion of inventory 97,152 69,122 78,022 Derivative financial instruments 254 - 213 Other assets 124,626 106,969 110,658 2,375,255 2,197,993 2,326,182
Current assets
Inventories 352,218 274,966 316,947 Trade and other receivables 23,443 59,242 29,858 Derivative financial instruments 1,723 - 4,050 Other current assets 38,276 62,697 33,271 Cash and cash equivalents 503,667 455,077 584,154 919,327 851,982 968,280
Total assets 3,294,582 3,049,975
3,294,462
EQUITY AND LIABILITIES
Share capital and share premium 929,199 929,199 929,199 Other reserves 1,844,017 1,689,745 1,832,032 Total owners' equity 2,773,216 2,618,944 2,761,231 Non-controlling interests 34,545 32,627 37,473 Total equity 2,807,761 2,651,571 2,798,704
Non-current liabilities
Deferred tax liabilities 147,800 158,606 149,544 Derivative financial instruments 938 476 56 Provisions 164,172 112,592 157,582 Other non-current liabilities 17,561 3,871 18,988 330,471 275,545 326,170
Current liabilities
Trade and other payables 150,340 115,730 161,916 Derivative financial instruments 839 989 58 Provisions 1,042 4,000 1,034 Other current liabilities 4,129 2,140 6,580 156,350 122,859 169,588
Total liabilities 486,821 398,404 495,758 Total equity and liabilities 3,294,582 3,049,975
3,294,462
The notes on pages 38-48 form an integral part of this financial information
Consolidated Statement of Changes in Equity
Contributed Cash surplus/ flow Stock Share Share Other hedging option
(in thousands of United States dollars) Notes capital premium reserve
reserve reserve
Balance at 31 December 2010 (Audited) 62,097 867,102
1,368,774 - 640
Total comprehensive income for the period - -
- - -
Conversion to contributed surplus - -
(62) - -
Dividends to equity holders of the Company - -
- - -
Distributions from non-controlling interests - -
- - - Stock option grants - - - - 753 Balance at 30 June 2011 (Unaudited) 62,097 867,102
1,368,712 - 1,393
Total comprehensive income for the period - -
- - -
Conversion to contributed surplus - -
1 - -
Dividends to equity holders of the Company - -
- - -
Distributions from non-controlling interests - -
- - - Stock option grants - - - - 648 Balance at 31 December 2011 (Audited) 62,097 867,102
1,368,713 - 2,041
Total comprehensive income for the period - -
- (222) -
Dividends to equity holders of the Company 10 - -
- - -
Distributions from non-controlling interests - -
- - - Stock option grants - - - - 776 Balance at 30 June 2012 (Unaudited) 62,097 867,102 1,368,713 (222) 2,817 Total Total non- Retained owners'
controlling Total (in thousands of United States dollars) Notes earnings equity interests equity
Balance at 31 December 2010 (Audited) 214,711 2,513,324
29,761 2,543,085
Total comprehensive income for the period 120,134 120,134
4,096 124,230
Conversion to contributed surplus - (62)
- (62)
Dividends to equity holders of the Company (15,205) (15,205)
- (15,205)
Distributions from non-controlling interests - - (1,230) (1,230) Stock option grants - 753 - 753
Balance at 30 June 2011 (Unaudited) 319,640 2,618,944
32,627 2,651,571
Total comprehensive income for the period 154,761 154,761
5,786 160,547
Conversion to contributed surplus - 1
- 1
Dividends to equity holders of the Company (13,123) (13,123)
- (13,123)
Distributions from non-controlling interests - -
(940) (940) Stock option grants - 648 - 648
Balance at 31 December 2011 (Audited) 461,278 2,761,231
37,473 2,798,704
Total comprehensive income for the period 65,152 64,930
370 65,300
Dividends to equity holders of the Company 10 (53,721) (53,721)
- (53,721)
Distributions from non-controlling interests - - (3,298) (3,298) Stock option grants - 776 - 776
Balance at 30 June 2012 (Unaudited) 472,709 2,773,216
34,545 2,807,761
The notes on pages 38-48 form an integral part of this financial information
Consolidated Statement of Cash Flows
For the year For the six months ended ended 31 Notes 30 June December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012
2011 2011
Cash flows from operating activities Net profit for the period 65,522 124,230 284,777 Adjustments for: Taxation 31,335 54,031 117,924 Depreciation and amortisation 75,235 60,099 135,683 Finance items 7 3,610 3,312 7,241
(Gain)/Loss on disposal of property, plant and equipment 6 (2,250)
- 179 Working capital adjustments (62,985) (64,730) (42,880) Other non-cash items 1,397 10,961 (704)
Cash generated from operations before interest and tax 111,864
187,903 502,220 Finance income 7 1,079 809 1,484 Finance expenses 7 (2,634) (2,578) (5,381) Income tax paid 8 - - -
Net cash generated by operating activities 110,309
186,134 498,323
Cash flows from investing activities Purchase of property, plant and equipment (118,749)
(117,071) (273,207) Investments in other assets (15,083) (643) (8,645) Other investing activities 2,739 1,606 320
Net cash used in investing activities (131,093)
(116,108) (281,532) (20,784)
Cash flows from financing activities
Dividends paid 10 (53,721) (15,205) (28,328)
Distributions to non-controlling interest holders (3,298)
- (2,170) Finance lease instalments (3,748) - (2,184)
Net cash used in financing activities (60,767)
(15,205) (32,682)
Net (decrease)/increase in cash and equivalents (81,551)
54,821 184,109
Net foreign exchange difference 1,064
(756) (967)
Cash and cash equivalents at 1 January 584,154
401,012 401,012
Cash and cash equivalents at period end 503,667
455,077 584,154
The notes on pages 38-48 form an integral part of this financial information.
Notes to the Consolidated Interim Financial Information
GENERAL INFORMATION
African Barrick Gold plc (the "Company") is a public limited company, which islisted on the London Stock Exchange and incorporated and domiciled in the UK.The Company's shares are also listed on the official list of the Dar Es SalaamStock Exchange in Tanzania. It is registered in England and Wales withregistered number 7123187. The address of its registered office is 6 StJames's Place, London, SW1A 2NP, United Kingdom.
Barrick Gold Corporation (''BGC'') currently owns 73.9% percent of the shares of the company and is the ultimate controlling party of the Group.
This condensed consolidated interim financial information for the six monthsended 30 June 2012 were approved for issue by the Board of Directors of thecompany on 20 July 2012. The condensed consolidated interim financialinformation does not comprise statutory accounts within the meaning of section434 of the Companies Act 2006. Statutory accounts for the year ended 31December 2011 were approved by the board of directors on 7 March 2012 anddelivered to the Registrar of Companies. The report of the auditors' on thoseaccounts was unqualified, did not contain an emphasis of matter paragraph anddid not contain any statement under section 498 of the Companies Act 2006. Thecondensed consolidated interim financial information has been reviewed, notaudited.
The Group's primary business is the mining, processing and sale of gold. The Group has four operating mines located in Tanzania. The Group also has a portfolio of exploration projects located across Africa.
BASIS OF PREPARATION OF the condensed annual financial statements
The condensed consolidated interim financial information for the six monthsended 30 June 2012 has been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with IAS 34,'Interim Financial Reporting' as adopted by the European Union. The condensedconsolidated interim financial information should be read in conjunction withthe annual financial statements for the year ended 31 December 2011, which havebeen prepared in accordance with IFRS's as adopted by the European Union.
The condensed consolidated interim financial information has been prepared under the historical cost basis, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
The financial information is presented in US dollars ($) and all monetary results are rounded to the nearest thousand ($'000) except when otherwise indicated.
Changes in the presentational format between the 2011 and 2010 annual reportshave been reflected in this interim financial information, with 30 June 2011comparative figures being restated accordingly. This includes the followingpresentational changes:
Corporate social responsibility expenses previously included in other charges have been separately disclosed on the face of the consolidated income statement.
The movement in the rehabilitation liability previously included in theinvesting cash flows of the cash flow statement has been reclassified. Themovement and the corresponding increase in property, plant and equipment hasbeen excluded from the cash flow statement due to the fact that it is anon-cash movement. The nature of the change is reclassification and does notaffect the net cash used in investing activities.
The segment capital expenditure has been expanded in the current period and restated in the prior period to include expenditure on capitalised development as a separate category. (Note 5)
The impact of the seasonality on operations is not considered significant on the condensed consolidated interim financial information.
After making enquiries, the Directors have a reasonable expectation that theGroup has adequate resources to continue in operational existence for theforeseeable future. The Group therefore continues to adopt the going concernbasis in preparing the consolidated interim financial information.
ACCOUNTING POLICIES
The accounting policies adopted are consistent with those used in the African Barrick Gold plc annual financial statements for the year ended 31 December 2011 except as described below.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
The following exchange rates to the US dollar have been applied:
Average Average Average year As at six months As at six months As at ended 30 ended 30 ended 31 31 June 30 June June 30 June December December 2012 2012 2011 2011 2011 2011
South African Rand (US$:ZAR) 8.18 7.93 6.76 6.89 8.08
7.23
Tanzanian Shilling (US$:TZS) 1,569 1,572 1,580 1,500 1,582
1,558
Australian Dollars (US$:AUD) 0.98 0.97 0.93 0.97 0.98
0.97 UK Pound (US$:GBP) 0.64 0.63 0.62 0.62 0.64 0.62
There are no new standards, interpretations or amendments to standards issued and effective for the period which materially impacted on the Group.
ESTIMATES
The preparation of condensed consolidated interim financial informationrequires management to make judgements, estimates and assumptions that affectthe application of accounting policies and the reported amounts of assets andliabilities, income and expense. Actual results may differ from theseestimates.In preparing this condensed consolidated interim financial information, thesignificant judgements made by management in applying the Group's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied to the consolidated financial statements for the year ended 31December 2011, with the exception of changes in estimates that are required indetermining the provision for income taxes (see Note 3).
Segment Reporting
The Group has only one primary product produced in a single geographiclocation, being gold produced in Tanzania. In addition the Group producescopper and silver as a co-product. Reportable operating segments are based onthe internal reports provided to the Chief Operating Decision Maker ("CODM") toevaluate segment performance, decide how to allocate resources and make otheroperating decisions. After applying the aggregation criteria and quantitativethresholds contained in IFRS 8, the Group's reportable operating segments weredetermined to be: North Mara gold mine; Tulawaka gold mine; Bulyanhulu goldmine; Buzwagi gold mine; and a separate Corporate and Exploration segment,which primarily consist of costs related to corporate administration andexploration and evaluation activities ("Other").Segment results and assets include items directly attributable to the segmentas well as those that can be allocated on a reasonable basis. Segment assetsconsist primarily of property, plant and equipment, inventories, other assetsand receivables. Capital expenditures comprise additions to property, plant andequipment. Segment liabilities are not reported since they are not consideredby the CODM as material to segment performance. The Group has also includedsegment cash costs.Segment information for the reportable operating segments of the Group for thesix months ended 30 June 2012 and 30 June 2011, and year ended 31 December
2011is set out below.(Unaudited) For the six months ended 30 June 2012
(in thousands of United States dollars except references to
ounces) North Mara Tulawaka Bulyanhulu Buzwagi Other Total Gold revenue 130,911 43,499 218,581 116,975 - 509,966 Co-product revenue 292 87 13,362 10,760 - 24,501 Total segment revenue 131,203 43,586 231,943 127,735 - 534,467 Segment cash operating cost¹ (89,370) (27,537) (106,766) (92,836) (35,994) (352,503) Other charges and corporate social responsibility expenses (3,460) (717) 551 (2,220) (5,179) (11,025) EBITDA² 38,373 15,332 125,728 32,679 (41,173) 170,939 Depreciation and amortisation (21,718) (11,113) (16,473) (19,615) (1,553) (70,472) EBIT² 16,655 4,219 109,255 13,064 (42,726) 100,467
Total segment finance income 1,079 Total segment finance expense
(4,689) Profit before taxation 96,857 Tax expense (31,335) Net profit for the period 65,522 Capital expenditure: Sustaining 21,178 4,700 15,059 21,832 4,364 67,133 Expansionary 4,557 1,861 1,168 - 3,053 10,639 Capitalised development 8,213 3,605 22,126 8,656 - 42,600
Rehabilitation asset adjustment 1,253 (602) 1,886 1,997
- 4,534 Total capital expenditure 35,201 9,564 40,239 32,485 7,417 124,906 Cash costs: Segment cash operating cost1 89,370 27,537 106,766 92,836 - 316,509 Deduct: Co-product revenue (292) (87) (13,362) (10,760) - (24,501) Total cash costs 89,078 27,450 93,404 82,076 - 292,008 Sold ounces3 79,600 26,250 133,417 71,249 - 310,516 Cash cost per ounce sold2 1,119 1,046 700 1,152 - 940 Equity ounce adjustment4 (2)
Attributable cash cost per ounce
sold2 938 (Unaudited) For the six months ended 30 June 2011
(in thousands of United States dollars except references to
ounces) North Mara Tulawaka Bulyanhulu Buzwagi Other Total Gold revenue 125,209 59,670 206,695 147,930 - 539,504 Co-product revenue 470 147 20,895 17,371 - 38,883 Total segment revenue 125,679 59,817 227,590 165,301 - 578,387 Segment cash operating cost¹ (70,193) (28,190) (102,869) (80,033) (36,603) (317,888) Other charges and corporate social responsibility expenses (5,752) (3,424) (4,520) (5,465) 3,589 (15,572) EBITDA² 49,734 28,203 120,201 79,803 (33,014) 244,927 Depreciation and amortisation (16,944) (6,533) (16,172) (21,833) (1,872) (63,354) EBIT² 32,790 21,670 104,029 57,970 (34,886) 181,573
Total segment finance income 809 Total segment finance expense
(4,121) Profit before taxation 178,261 Tax expense (54,031) Net profit for the period 124,230 Capital expenditure: Sustaining 24,593 4,055 12,657 14,548 1,575 57,428 Expansionary5 10,319 2,331 5,799 586 - 19,035 Capitalised development5 16,638 2,880 15,695 5,395 - 40,608
Rehabilitation asset adjustment 593 13 618 371
- 1,595 Total capital expenditure 52,143 9,279 34,769 20,900 1,575 118,666 Cash costs: Segment cash operating cost1 70,193 28,190 102,869 80,033 - 281,285 Deduct: Co-product revenue (470) (147) (20,895) (17,371) - (38,883) Total cash costs 69,723 28,043 81,974 62,662 - 242,402 Sold ounces3 85,650 40,850 141,805 101,033 - 369,338 Cash cost per ounce sold2 814 686 578 620 - 656 Equity ounce adjustment4 (1)
Attributable cash cost per ounce
sold2 655 (Audited) For the year ended 31 December 2011
(in thousands of United States dollars except references to
ounces) North Mara Tulawaka Bulyanhulu Buzwagi Other Total Gold revenue 272,026 131,435 429,528 317,036 - 1,150,025 Co-product revenue 917 316 35,509 31,148 - 67,890 Total segment revenue 272,943 131,751 465,037 348,184 - 1,217,915 Segment cash operating cost¹ (139,204) (60,952) (200,072) (169,737) (80,844) (650,809) Other charges and corporate social responsibility expenses (5,112) (2,826) (8,461) (12,334) 5,718 (23,015) EBITDA² 128,627 67,973 256,504 166,113 (75,126) 544,091 Depreciation and amortisation (34,724) (17,251) (32,320) (46,029) (3,825) (134,149) EBIT² 93,903 50,722 224,184 120,084 (78,951) 409,942
Total segment finance income
1,484
Total segment finance expense
(8,725) Profit before taxation 402,701 Tax expense (117,924) Net profit for the period 284,777 Capital expenditure: Sustaining 30,567 3,101 42,749 56,992 11,802 145,211 Expansionary 47,381 8,346 6,626 920 - 63,273 Capitalised development 26,407 9,252 32,748 15,583 - 83,990
Rehabilitation asset adjustment 18,791 10,953 13,309 9,708
- 52,761 Total capital expenditure 123,146 31,652 95,432 83,203 11,802 345,235 Cash costs: Segment cash operating cost¹ 139,204 60,952 200,072 169,737 - 569,965 Deduct: Co-product revenue (917) (316) (35,509) (31,148) - (67,890) Total cash costs 138,287 60,636 164,563 138,589 - 502,075 Sold ounces³ 170,625 83,450 269,981 200,518 - 724,574 Cash cost per ounce sold² 810 727 610 691 - 693 Equity ounce adjustmentâ´ (1) Attributable cash cost per ounce sold² 692 1 The Chief Operating Decision Maker reviews cash operating costs for thefour operating mine sites separately from corporate administration costs andexploration costs. Consequently, the Group has reported these costs in thismanner.
2 These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to "Non-IFRS measures" on page 29 for definitions.
3 Reflects 100% of ounces sold.4 Reflects the adjustment for non-controlling interests at Tulawaka.
5 The prior year segment capital expenditure has been restated to separately reflect capitalised development.
As at As at 31 30 June December (Unaudited) (Unaudited) (Audited) (in thousands of United States dollars) 2012 2011 2011 Segment assets North Mara 745,484 643,851 727,552 Tulawaka 104,957 111,589 131,193 Bulyanhulu 1,138,681 1,112,766 1,128,992 Buzwagi 870,029 774,388 830,790 Other 435,431 407,381 475,935 Total segment assets 3,294,582 3,049,975 3,294,462 OTHER CHARGES For the year For the six months ended ended 31 30 June December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012 2011
2011 Other expenses
Loss on disposal of property, plant and equipment - -
179 Severance payments - 874 1,646
Foreign exchange losses (net) - 12,509
6,001
Unrealised non-hedge derivative losses 2,956 -
-
Construction and consumable inventory write-down 1,667 -
4,684 Bad debt expense 527 - 1,098 Disallowed indirect taxes 358 3,195 7,123 Asset write-downs - - 1,252 Legal fees 789 - - Other 2,573 (185) 1,696 Total¹ 8,870 16,393 23,679 Other income
Gain on disposal of property, plant and equipment (2,250) -
-
Unrealised non-hedge derivative gains - (2,193)
(7,901) Foreign exchange gains (net) (2,345) - - Other - - (139) Total (4,595) (2,193) (8,040) Total other charges 4,275 14,200 15,639
1 Corporate social responsibility expenses previously included in other charges have been disclosed separately on the face of the consolidated income statement.
FINANCE INCOME AND FINANCE EXPENSE
Finance income For the six months ended For the year ended 30 June 31 December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012 2011 2011
Interest on time deposits 618 571 1,030 Other 461 238 454 Total 1,079 809 1,484 Finance expense For the six months ended For the year ended 30 June 31 December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2,012 2,011 2,011
Unwinding of discount¹ 2,055 1,543 3,344 Interest on bank overdraft 7 204 199
Revolving credit facility charges² 1,499 2,374
4,570
Interest on finance lease liability 459 -
247 Other 669 - 365 Total³ 4,689 4,121 8,725
1 The unwinding of discount is calculated on the environmental rehabilitation provision.
2 Included in credit facility charges are the amortisation of the fees related to the revolving credit facility as well as the monthly interest and facility fees.
3 For cash flow purposes unwinding of discount is excluded from the financeexpense movement.TAX EXPENSE For the year For the six months ended ended 31 30 June December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012 2011
2011 Current tax:
Current tax on profits for the period 737 249
10,162
Adjustments in respect of prior years¹ - -
28,663 Total current tax 737 249 38,825 Deferred tax:
Origination and reversal of temporary differences 30,598 53,782
79,099 Total deferred tax 30,598 53,782 79,099 Income tax expense 31,335 54,031 117,924 1 During 2011, a binding Memorandum of Settlement with the Tanzanian Revenue Authority (TRA) was executed to address the treatment of certain outstanding indirect tax refunds in respect of fuel levies and value added taxation. The terms of the Memorandum of Settlement allow the Group to offset income tax payable against outstanding refunds for VAT and fuel levies. As a result of these changes, PML, which is the taxpaying entity holding Tulawaka and Buzwagi, has agreed to treat both mines as separate tax entities and in the absence of the capital expenditure deduction in Buzwagi, the Tulawaka mine has prior year taxable profits which can be immediately paid by offsetting against the indirect tax receivable balance owing to the Group.
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities as follows:
For the year For the six months ended ended 31 30 June December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012 2011
2011 Profit before taxation 96,857 178,261 402,701
Tax on profit on ordinary activities at the
Tanzanian tax rate of 30% 29,057 53,478 114,199 Tax effects of: Non-taxable income - - (1,219)
Tax losses for which no deferred income tax asset
was recognised 3,357 4,157 7,302 Prior year adjustments - - (2,391)
Effect of tax rates in foreign jurisdictions (1,079) (3,604)
33 Tax charge 31,335 54,031 117,924
The tax rate in Tanzania is 30% (2011: 30%) and in South Africa 28% (2011:
28%). The effective forecast tax rate for the period of 32% (six months ended 30 June 2011: 30%; year ended 31 December 2011: 28%) is in line with the
applicable standard tax rate of corporation tax in Tanzania (30%). Tax periods remain open to review by the Tanzanian Revenue Authority ("TRA") inrespect of income taxes for five years following the date of the filing of thecorporate tax return, during which time the authorities have the right to raiseadditional tax assessments including penalties and interest. Under certaincircumstances the reviews may cover longer periods. Because a number of taxperiods remain open to review by tax authorities, there is a risk thattransactions that have not been challenged in the past by the authorities maybe challenged by them in the future, and this may result in the raising ofadditional tax assessments plus penalties and interest.
Earnings per share
Basic earnings per share ("EPS") is calculated by dividing the net profit forthe period attributable to owners of the Company by the weighted average numberof Ordinary Shares in issue during the period.Diluted earnings per share is calculated by adjusting the weighted averagenumber of Ordinary Shares outstanding to assume conversion of all dilutivepotential Ordinary Shares. The Company has dilutive potential Ordinary Sharesin the form of stock options. The weighted average number of shares is adjustedfor the number of shares granted assuming the exercise of stock options.At 30 June 2012, 30 June 2011 and 31 December 2011, earnings per share havebeen calculated as follows: For the six months For the ended year ended 30 June 31 December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012
2011 2011 Earnings
Profit from continuing operations attributable to owners of
the parent 65,152 120,134 274,895
Weighted average number of Ordinary Shares in issue 410,085,499
410,085,499 410,085,499
Adjusted for dilutive effect of:
- Stock options - 13,384 10,606
Weighted average number of Ordinary Shares for diluted
earnings per share 410,085,499 410,098,883 410,096,105 Earnings per share
Basic earnings per share from continuing operations (cents) 15.9
29.3 67.0
Dilutive earnings per share from continuing operations (cents) 15.9
29.3 67.0 DIVIDENDSThe final dividend declared in respect of the year ended 31 December 2011 ofUS$53.7 million (US13.1 cents per share) was paid during 2012 and recognised inthe financial statements.
Property plant and equipment
(Unaudited) (in thousands of United Plant and Mineral properties and Assets under States dollars) equipment mine development costs construction¹ Total
For the six months ended 30
June 2012 At 1 January 2012, net of accumulated depreciation 894,869 765,519 162,859 1,823,247 Additions - - 124,906 124,906 Disposals/write-downs (1,394) - - (1,394) Depreciation (54,148) (21,087) - (75,235) Transfers between categories 50,509 51,475 (101,984) - At 30 June 2012 889,836 795,907 185,781 1,871,524 At 1 January 2012 Cost 1,316,602 1,117,311 162,859 2,596,772 Accumulated depreciation (421,733) (351,792) - (773,525) Net carrying amount 894,869 765,519 162,859 1,823,247 At 30 June 2012 Cost 1,361,372 1,168,786 185,781 2,715,939 Accumulated depreciation (471,536) (372,879) - (844,415) Net carrying amount 889,836 795,907 185,781 1,871,524
For the six months ended 30
June 2011 At 1 January 2011, net of accumulated depreciation 796,999 693,834 124,285 1,615,118 Additions - - 118,666 118,666 Disposals/write-downs (204) - - (204) Depreciation (22,632) (37,467) - (60,099) Transfers between categories 25,507 48,860 (74,367) - At 30 June 2011 799,670 705,227 168,584 1,673,481 At 1 January 2011 Cost 1,125,072 1,005,279 124,285 2,254,636 Accumulated depreciation (328,073) (311,445) - (639,518) Net carrying amount 796,999 693,834 124,285 1,615,118 At 30 June 2011 Cost 1,148,965 1,054,139 168,584 2,371,688 Accumulated depreciation (349,295) (348,912) - (698,207) Net carrying amount 799,670 705,227 168,584 1,673,481 (Audited) (in thousands of United Plant and Mineral properties and Assets under States dollars) equipment mine development costs construction¹ Total For the year ended 31 December 2011 At 1 January 2011, net of accumulated depreciation 796,999 693,834 124,285 1,615,118 Additions - - 345,235 345,235 Disposals/write-downs (1,423) - - (1,423) Depreciation (95,336) (40,347) - (135,683) Transfers between categories 194,629 112,032 (306,661) - At 31 December 2011 894,869 765,519 162,859 1,823,247 At 1 January 2011 Cost 1,125,072 1,005,279 124,285 2,254,636 Accumulated depreciation (328,073) (311,445) - (639,518) Net carrying amount 796,999 693,834 124,285 1,615,118 At 31 December 2011 Cost 1,316,602 1,117,311 162,859 2,596,772 Accumulated depreciation (421,733) (351,792) - (773,525) Net carrying amount 894,869 765,519 162,859 1,823,247 1 Assets under construction represents (a) sustaining capital expendituresincurred constructing tangible fixed assets related to operating mines andadvance deposits made towards the purchase of tangible fixed assets; and (b)expansionary expenditure allocated to a project on a business combination orasset acquisition, and the subsequent costs incurred to develop the mine. Oncethese assets are ready for their intended use, the balance is transferred toplant and equipment, and/ or mineral properties and mine development costs.
Leases
Property, plant and equipment includes assets relating to the design andconstruction costs of power transmission lines and related infrastructure. Atcompletion, ownership was transferred to Tanesco in exchange for amortisedrepayment in the form of reduced electricity supply charges. No future leasepayment obligations are payable under these finance leases.
Property, plant and equipment also includes emergency back-up and spinning power generators leased at Buzwagi mine under a three year lease agreement, with an option to purchase the equipment at the end of the lease term. The lease has been classified as a finance lease.
Property, plant and equipment further includes drill rigs leased at Buzwagi mine under a one year rent to own lease agreement. The lease has been classified as a finance lease.
The following amounts were included in property, plant and equipment where the Group is a lessee under a finance lease:
For the six months ended For the year ended 30 June 31 December (Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2012 2011
2011
Cost - capitalised finance leases 69,812 48,661
67,223 Accumulated depreciation (10,865) (6,236) (7,582) Net carrying amount 58,947 42,425 59,641 Commitments and ContingenciesThe Group is subject to various laws and regulations which, if not observed,could give rise to penalties. As at 30 June 2012, the Group has the followingcommitments and/or contingencies:a) Legal contingenciesAs at 30 June 2012, the Group was a defendant in approximately 201 lawsuits.The plaintiffs are claiming damages and interest thereon for the loss caused bythe Group due to one or more of the following: unlawful eviction, terminationof services, wrongful termination of contracts of service, non-payment forservices, defamation, negligence by act or omission in failing to provide asafe working environment, unpaid overtime and public holidays compensation.The total amounts claimed from lawsuits in which specific monetary damages aresought amounted to US$31.5 million. The Group's Legal Counsel is defending theGroup's current position, and the outcome of the lawsuits cannot presently bedetermined. However, in the opinion of the Directors and Group's Legal Counsel,no material liabilities are expected to materialise from these lawsuits.Consequently no provision has been set aside against the claims in the books ofaccount.A claim by the TRA in respect of a tax assessment of US$21.3 million for theacquisition of Tusker was heard during the current year and ruled in the favourof ABG.Also included in the total amounts claimed of US$31.5 million is a claim ofUS$2.8 million against North Mara Gold Mine being compensation for uncausedimprovements, disturbance and accommodation allowance, rich gold land currentvalue, interest and costs. Management are of the opinion that the defence islikely to succeed.b) Tax-related contingenciesi. On 26 October 2009, the TRA issued a demand notice against the Group foran amount relating to withholding tax on technical services provided toBulyanhulu Gold Mine Ltd. The claim amounts to US$5.4 million. Management is ofthe opinion that the Group complied with all of the withholding taxrequirements, and that there will be no amount payable. Therefore no provisionhas been raised.ii. The TRA has issued a number of tax assessments to the Group relating topast taxation years from 2002 onwards. The Group believes that theseassessments are incorrect and has filed objections to each of them. The Groupis attempting to resolve these matters by means of discussions with the TRA.Management is of the opinion that this will not result in any materialliabilities to the Group.
RELATED PARTY BALANCES AND TRANSACTIONS
The Group has related party relationships with entities owned or controlled by Barrick Gold Corporation, which is the ultimate controlling party of the Group.
The Company and its subsidiaries, in the ordinary course of business, enter into various sales, purchase and service transactions with others in the Group. These transactions are under terms that are on normal commercial terms and conditions. These transactions are not considered to be significant.
At 30 June 2012 the Group had no loans of a funding nature due to or from related parties (30 June 2011: zero; 31 December 2011: zero).
subsequent events
The Board of the Company has approved an interim dividend of US4.0 cents pershare for this financial year to be paid on 24 September 2012 to shareholderson the register on 31 August 2012.On 23 July 2012, ABG entered into an agreement with Aviva Corporation Limited to acquire all of the outstanding share capital of AvivaMining (Kenya) Limited ("AMKL"), the assets of which include interests in anumber of Licences in West Kenya, for initial cash consideration ofA$20 million. The acquisition is subject to the approval of Aviva'sshareholders, which is expected to be sought at a general meeting in lateAugustor early September; and the consent of the Kenyan Competition Authority, withcompletion expected shortly thereafter.
PINXRelated Shares:
ACA.L