TORONTO, ONTARIO — (Marketwired) — 10/29/13 — Teranga Gold Corporation (TSX: TGZ)(ASX: TGZ) –
SABODALA GOLD OPERATION
KEY THIRD QUARTER HIGHLIGHTS
(1) This production target is based on existing proven and probable reserves only.
(2 ) Total cash costs per ounce and all-in sustaining costs per ounce are non-IFRS measures which do not have standard meanings under IFRS.
OPERATIONAL OVERVIEW
Sabodala Gold Operation
(All amounts are in US$ unless otherwise stated)
OUTLOOK 2013
Gold production for 2013 is expected to be at the higher end of the original guidance range of 190,000 to 210,000 ounces, while total cash costs are expected to be at the lower end of our $650 to $700 per ounce guidance. All-in sustaining costs (as defined by the World Gold Council) are expected to be in the range of $1,000 to $1,100 per ounce. Gold sales are expected to exceed production for the year as gold in circuit inventory is reduced. As per the mine plan, gold production in the fourth quarter is expected to be higher than the third quarter as mining activity reaches the high grade benches in phase 3 of the Sabodala pit.
In the first quarter of 2013, the Company reduced discretionary expenditures in a number of key areas including operations, exploration and administration, as well as sustaining and development capital and as such provided new guidance for the year for these items with the Company-s first quarter results. The Company is on track to meet the revised guidance.
In total, between capitalized reserve development and regional exploration expenditures, the Company expects to spend approximately $8 million in 2013 on exploration, in line with revised guidance for the year.
Administrative expenditures which include corporate office costs, Dakar office costs and corporate social responsibility costs, but exclude depreciation, transaction and other non-recurring costs, are now expected to be $14 million, $1 million higher than our revised guidance, which was mainly due to higher corporate social responsibility costs and higher expenses out of our Dakar office.
Capitalized expenditures, including sustaining mine site expenditures, project development expenditures and capitalized deferred stripping are expected to total $65 million, in line with revised guidance for the year.
Expenditures related to the acquisition and funding of Oromin, including legal and advisory costs, loan repayment, severance and termination benefits and ongoing provision of Oromin-s share of funding of the OJVG are expected to total approximately $15 million in 2013. As at September 30, 2013, $9.6 million had been paid towards these costs.
FINANCE
At September 30, 2013:
Cash and cash equivalents – $32.2 million
Trade receivables (bullion) – $4.0 million
Project finance facility (balance outstanding) – $60.0 million
Mining fleet lease facility (balance outstanding) – $20.2 million
STRATEGY AND MINE PLAN
In the first quarter of 2013, gold equities came under pressure. Significant downward movements in gold prices followed and in light of this we took steps in the first quarter to reduce 2013 discretionary spending in all areas without impacting our production guidance, including lowering waste stripping to lower mining costs, reduce exploration and reserve development expenditures, sustaining and new project development expenditures as well as corporate overheads. This was all done before the most recent decline in the gold price in late June 2013.
During the second quarter the exploration team was consolidated into one exploration facility, a revised organizational design was applied and the necessary staff personnel were reduced to gain in efficiencies. As well, technical work continued to support Sabodala operations including optimization of the resource through modelling and grade control, evaluating geotechnical opportunities for waste reduction in the pit wall design and waste dump designs for improved mine operating costs.
During the third quarter, as part of the Company-s ongoing effort to maximize free cash flows during this period of lower and more volatile gold prices, management designed a new mine plan on a standalone basis maximizing gold production while minimizing operating, sustaining, new project development, corporate and other costs. In early October, this new mine plan was filed as part of a National Instrument 43-101 („NI 43-101“) compliant Sabodala Technical Report on Sedar () and ASX ().
The new optimized mine plan has been designed to provide earlier access to higher grade material within the Sabodala pit and reduce overall waste material moved, freeing up mobile equipment for the development of satellite deposits, including those within the OJVG and Gora. The new mine plan is expected to deliver between 210,000 and 240,000 ounces(1) of annual gold production over the period 2014 to 2016 at all-in sustaining cash cost estimated at between $800 and $1,000 per ounce. As a result, at $1,350 per ounce gold, the Company expects to generate between $150 and $200 million in free cash flow after $80 million in capital expenditures and $85 million in debt repayments over the period.
Another key element of this new mine plan is sequencing the commencement of Gora development to late 2014. This allows us to utilize mobile equipment from Sabodala, which is expected to result in $20 to $25 million in reduced capital costs for mobile equipment compared to our previous mine plan. Under this revised mine plan, Gora production start-up is now anticipated in early 2015.
The optimized mine plan results in a reduction of reserves of approximately 214,000 ounces of marginal gold or 13 percent of reserves as of March 31, 2013. The reduction in reserves at Sabodala maximizes near term cash flows over the period 2014 to 2016 by removing high cost ounces that have a higher strip ratio of approximately 15:1 (waste to ore).
GORA DEVELOPMENT
Gora is planned to be operated as a satellite to the Sabodala mine requiring limited local infrastructure and development. Ore will be hauled to the Sabodala processing plant by a dedicated fleet of trucks and processed on a priority basis, displacing Sabodala feed as required.
A technical report and an environmental and social impact assessment (ESIA) have been provided to the Senegalese government, and the permit approval process is ongoing.
Management expects the permit process to conclude and construction to be initiated in late 2014 based on a standalone mine plan. This is subject to spot gold prices and the outcome of the integrated mine plan with the OJVG.
ACQUISITION OF OROMIN EXPLORATIONS LTD.
On August 6, 2013, the Company acquired 78,985,388 common shares of Oromin Explorations Ltd. („Oromin“), representing approximately 57.7 percent of the Oromin shares that the Company did not already own. Together with the 18,669,500 Oromin shares owned by the Company, this represented a combined 97,684,888 Oromin shares or approximately 71.1 percent of the outstanding Oromin shares. A further 2,091,013 shares were obtained as part of this acquisition process, bringing the total to 99,775,901 Oromin shares or approximately 72.6 percent of the outstanding Oromin shares as at September 30, 2013. Subsequent to the quarter end on October 4, 2013, the Company obtained 37,562,017 Oromin shares and completed the acquisition of all of the issued and outstanding common shares of Oromin.
The Company issued 71,183,091 Teranga shares to acquire all of the Oromin shares for net consideration of $37.8 million, including the fair value of Oromin stock options replaced by 7,911,600 Teranga stock options. As a result, Teranga-s total number of issued and outstanding shares increased to 316,801,091 as of October 4, 2013.
Acquisition related costs of approximately $7.3 million have been expensed during the nine months ended September 30, 2013.
OROMIN TECHNICAL INTEGRATION
The acquisition of Oromin in August 2013 provided access to the OJVG technical data. Since then, management has been evaluating the geological and technical databases to be able to develop an integrated mine plan that will support a NI 43- 101 compliant resources and reserves technical report, targeted for Q1 2014.
The ongoing technical work for the OJVG integrated mine plan includes:
In addition to development of an integrated LOM, the Oromin technical team has been engaged with the Teranga technical teams both at site in Senegal and the corporate offices.
Next steps are anticipated to be:
MINE LICENSE (ML) RESERVE DEVELOPMENT
There were no drill programs conducted on the ML during the third quarter. The drill program at Sabodala was completed in the first quarter of 2013, with results returned by mid-April 2013.
The timing of a planned drill program at the Niakafiri deposit along strike to the North is under review in light of both the decrease in gold prices and the acquisition of Oromin, which may lead to a re-evaluation of priorities.
Additional surface mapping was carried out at Niakafiri in conjunction with the re-logging of several diamond drill holes with a view to updating the geological model for the Niakafiri deposit.
REGIONAL EXPLORATION
Due to the annual rainy season during the third quarter, the exploration team did a minimal amount of field work and was primarily focused on site mapping, trenching, interpretation and site investigation for several high potential targets on our regional land package.
Additionally, since the acquisition of Oromin, the two geological teams have been working as one unit for the detailed due diligence review and remodeling of the Golouma and Masato deposits. In addition, detailed reviews are ongoing for the other OJVG resources and reserves, with the intention to integrate these into the scope for the 2014 exploration program.
RESERVES AND RESOURCES
Mineral Resources at June 30, 2013 are presented in Table 1 below. Total proven and probable mineral reserves at June 30, 2013 are set forth in Table 2 below. The reported Mineral Resources are inclusive of the Mineral Reserves.
The proven and probable mineral reserves for the Sabodala, Niakafiri and Gora deposits were based on the Measured and Indicated resources that fall within the designed pits. The basis for the resources and reserves is consistent with the Canadian Securities Administrators NI 43-101 regulations. The design for the open pit limits, related phasing and long term planning for the Sabodala open pit was carried out to maximize the economics under current market conditions by removing high cost gold ounces in the Sabodala pit.
The revised Sabodala pit design uses similar geotechnical parameters as in past designs and is based on a $1,000 per ounce gold price for the LG pit optimization routine. For the final design the pit limits were marginally adjusted from the LG shell to maximize recovery in phase 3 and phase 4 based on access constraints and mine operating geometry. The cut off grades were established with an estimated gold price of $1,350/oz. Additional design optimization work is ongoing to potentially increase wall angles to take advantage of geotechnical opportunities that have recently been revealed as part of an ongoing technical analysis. Mining phases have been determined similarly to the previous designs, where the mine sequencing is based on accessing the high grade Main Flat Extension (MFE) through successive phases to balance waste stripping and optimize cash flows.
Dilution and ore recovery estimates for the Sabodala reserves were based on a comparison of the resource model with actual production performance over a 14 month span using a 5 metre minimum mining width and 10 metre bench height.
The Niakafiri pit design remains unchanged from December, 2012. The Gora pit design has been adjusted to reflect an LG pit shell at US$1,200 per ounce and an updated dilution analysis.
The technical information contained in this document relating to the mineral reserve estimates for Gora and Niakafiri is based on information compiled by Julia Martin, P.Eng. who is a member of the Professional Engineers of Ontario and a Member of AusIMM (CP). Ms. Martin is a full time employee with AMC Mining Consultants (Canada) Ltd., is independent of Teranga, is a „qualified person“ as defined in NI 43-101 and a „competent person“ as defined in the 2004 Edition of the „Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves“. Ms. Martin has sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity she is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the „Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves“. Ms. Martin is a „Qualified Person“ under National Instrument 43-101 Standards of Disclosure for Mineral Projects. Ms. Martin has reviewed and accepts responsibility for the Mineral Reserve estimates for Gora and Niakafiri disclosed in this document and has consented to the inclusion of the matters based on her information in the form and context in which it appears in this document.
The technical information contained in this document relating to the Mineral Resource estimates is based on information compiled by Patti Nakai-Lajoie, P. Geo., who is a Member of the Association of Professional Geoscientists of Ontario. Ms. Nakai-Lajoie is a full time employee of Teranga and is not „independent“ within the meaning of National Instrument 43-101. Ms. Nakai-Lajoie has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the „Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves“. Ms. Nakai-Lajoie is a „Qualified Person“ under National Instrument 43-101 Standards of Disclosure for Mineral Projects. Ms. Nakai-Lajoie has reviewed and accepts responsibility for the Mineral Resource estimates disclosed in this document and has consented to the inclusion of the matters based on her information in the form and context in which it appears in this document.
The technical information contained in this document relating to the Mineral Reserve estimates for Sabodala and the stockpiles is based on information compiled by Paul Chawrun, P. Eng., who is a member of the Professional Engineers of Ontario. Mr. Chawrun is a full time employee of Teranga and is not „independent“ within the meaning of National Instrument 43-101. Mr. Chawrun has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the „Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves“. Mr. Chawrun is a „Qualified Person“ under National Instrument 43-101 Standards of Disclosure for Mineral Projects. Mr. Chawrun has reviewed and accepts responsibility for the Mineral Reserve estimate for Sabodala disclosed in this document and has consented to the inclusion of the matters based on his information in the form and context in which it appears in this document.
Forward Looking Statements
This news release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws („forward-looking statements“). Such forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Teranga, or developments in Teranga-s business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, all disclosure regarding possible events, conditions or results of operations that are based on assumptions about future economic conditions and courses of action. Teranga cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. The risks and uncertainties that may affect forward-looking statements include, among others: the inherent risks involved in exploration and development of mineral properties, changes in economic conditions, changes in the worldwide price of gold and other key inputs, changes in mine plans and other factors, such as project execution delays, many of which are beyond the control of Teranga, as well as other risks and uncertainties which are more fully described in the Company-s Annual Information Form dated March 27, 2013, and in other company filings with securities and regulatory authorities which are available at . Forward-looking statements are based on management-s current plans, estimates, projections, beliefs and opinions, and, except as required by law, Teranga does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change. Nothing in this news release should be construed as either an offer to sell or a solicitation to buy or sell Teranga securities.
Competent Persons Statement
The technical information contained in this document relating to the Mineral Resource estimates is based on information compiled by Patti Nakai-Lajoie, P. Geo., who is a Member of the Association of Professional Geoscientists of Ontario. Ms. Nakai-Lajoie is a full time employee of Teranga and is not „independent“ within the meaning of National Instrument 43- 101. Ms. Nakai-Lajoie has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the „Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves“. Ms. Nakai-Lajoie is a „Qualified Person“ under National Instrument 43-101 Standards of Disclosure for Mineral Projects. Ms. Nakai-Lajoie has reviewed and accepts responsibility for the Mineral Resource estimates disclosed in this document and has consented to the inclusion of the matters based on her information in the form and context in which it appears in this document.
About TERANGA
Teranga is a Canadian-based gold company listed on the Toronto Stock Exchange (TSX: TGZ) and Australian Securities Exchange (ASX: TGZ). Teranga is principally engaged in the production and sale of gold, as well as related activities such as exploration and mine development.
Teranga-s mission is to create value for all of its stakeholders through responsible mining. Its vision is to explore, discover and develop gold mines in West Africa, in accordance with the highest international standards, and to be a catalyst for sustainable economic, environmental and community development. All of its actions from exploration, through development, operations and closure will be based on the best available techniques.
Contacts: Teranga Gold Corporation Kathy Sipos Vice-President, Investor & Stakeholder Relations +1 416-594-0000
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