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ACACIA MINING PLC - Results for the 12 months ended 31 December 2014
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PR Newswire
London, February 15
16 February 2015
Results for the 12 months ended 31 December 2014 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc ("Acacia'') reports full year 2014 results
"2014 was a watershed year for Acacia as we returned to free cash generation
for the first time since 2011, exceeding our initial production guidance and
reducing all-in sustaining costs (AISC) year-on-year by 18%. Coupled with this
we completed our rebranding to reflect our new approach to running the
business, set out our five year plan for the Company and expanded our
footprint into West Africa," said Brad Gordon, Chief Executive Officer of
Acacia Mining. "We have continued to deliver operationally and demonstrated
consistent cost control which has meant that we have now exceeded the planned
savings set out by the Operational Review 18 months ago. For 2015 we expect a
further increase in production to 750,000 to 800,000 ounces of gold,
predominantly in the second half, at reduced AISC of US$1,050 to US$1,100 per
ounce sold driven by further operational improvements and the planned ramp up
at Bulyanhulu."
Full Year Financial Highlights
- Revenue of US$930 million in line with 2013, as increased ounces sold offset
the lower gold price
- EBITDA1,3 of US$253 million, 5% higher than 2013, impacted by non-cash
charges of US$27 million
- Net earnings3 of US$90 million (US22.1 cents per share)
- Operational cash flow increased to US$290 million, a 55% increase
on 2013
- Cash position increased by US$11 million to stand at US$294
million as at 31 December 2014
- Capital expenditure of US$254 million, 34% lower than 2013 due to
revised mine plans and stringent capital controls
- Proposed final dividend of US2.8 cents per share, total dividend
for 2014 of US4.2 cents per share, up 40% on 2013
Full Year Operational Highlights
- Gold production of 718,651 ounces, 13% higher than 2013, with
gold sales of 703,680 ounces
- AISC1,2 of US$1,105 per ounce sold, 18% lower than 2013
- Cash costs1,2 of US$732 per ounce sold, 10% lower than 2013
- Operational Review cost reductions of US$185 million delivered as
planned
- Bulyanhulu CIL Expansion project fully commissioned in the fourth
quarter
- Gokona Underground project approved by the Board and moving ahead
into execution phase
- 2.3Moz of resources added at Bulyanhulu as a result of drilling
programmes
- Greenfield exploration progressed well with continued positive
results in West Kenya and entry into Burkina Faso
Three months ended 31 December Year ended 31 December
(Unaudited) 2014 20132 2014 20132
Gold production (ounces) 181,084 165,375 718,651 637,002
Gold sold (ounces) 194,243 168,167 703,680 643,597
Cash cost (US$/ounce)1 744 774 732 812
AISC (US$/ounce)1 1,088 1,163 1,105 1,346
Average realised gold price (US$/ounce)1 1,194 1,251 1,258 1,379
(in US$'000)
Revenue 243,861 221,603 930,248 929,004
EBITDA1,3 45,260 44,866 252,716 240,407
Net earnings/(loss)3 21,136 (97,700) 90,402 (781,101)
Basic earnings/(loss) per share (EPS) (cents)3 5.2 (23.8) 22.1 (190.4)
Cash generated from operating activities3 60,993 48,193 289,528 187,115
Capital expenditure3,4 57,807 91,190 253,802 385,068
1 These are non-IFRS measures. Refer to page 25 for definitions
2 2013 comparative amounts have been restated to exclude Tulawaka
3 EBITDA, net earnings, earnings per share, cash generated from
operating activities and capital expenditure include continuing and
discontinued operations
4 Excludes non-cash capital adjustments (reclamation asset adjustments) and
includes finance lease purchases
CEO Statement
I am delighted with the progress we have made across the business over the
last twelve months. We continued to deliver operationally, with each quarter
showing lower all-in sustaining costs. This discipline enabled us to return to
free cash generation, for the first time since 2011, which was one of our key
objectives for the year. Our continued operational improvement was driven by a
fresh approach to running the Company focused on three key pillars: Our
Business, Our People and Our Relationships. In order to further embed and
reflect this approach, our shareholders voted to change the Company's name to
Acacia Mining plc from African Barrick Gold plc on 26 November. Our ambition
is that, through the adoption of this new name, all of our people and external
stakeholders become aligned with our new approach and goal of becoming a
leading African mining company. We have already seen evidence that this is
happening as the new approach is put into action.
During 2014 we continued to enhance our mines and approved the development of
an underground operation at North Mara which will significantly improve both
the economics of the mine and the social situation in the area. We are
continuing to turn Bulyanhulu into a world class mine and during the year
engaged contractors to accelerate underground development to provide future
flexibility as well as pouring the first gold from the CIL Plant Expansion at
the mine. With a contrarian approach we took advantage of the dislocation in
the market to expand our exploration footprint, and in November expanded into
West Africa through an exciting and highly prospective exploration project in
Burkina Faso.
Year in Review
2014 was a successful year for Acacia, with production increasing again to
718,651 ounces, 13% higher than 2013 and 4% above the upper end of our initial
guidance range for the year. Production increased at all three mines with
Bulyanhulu up 18% on 2013, Buzwagi up 15% on 2013 and delivering its highest
ever year of gold production and North Mara remaining the standout performer,
producing 273,803 ounces as the grade from the Gokona pit continued to be
strong.
On the cost side, we demonstrated consistent cost control and have now taken
US$600 per ounce out of our quarterly all-in sustaining costs ("AISC") since
Q3 2012. This translated into full year AISC of US$1,105 per ounce sold, down
18% on 2013 and at the bottom of our guidance range. We delivered on our
targeted cost savings of US$185 million set out in the Operational Review in
2013 and our continued focus is on removing further costs from the mining
cycle. As a result of the cost savings, cash costs per ounce continued to come
down and for 2014 we delivered cash cost per ounce sold of US$732, below our
guidance range and 10% lower than 2013.
We returned to cash generation for the first time in three years during 2014,
adding US$11 million to the balance sheet. Whilst this is positive, it does
not reflect the scale of change that took place during the year, with positive
cash flows of more than US$100 million before growth capital, dividends and
Tulawaka sale costs. It should be noted that the average realised gold price
of US$1,258 per ounce was over US$100 per ounce lower than 2013 and over
US$400 per ounce lower than 2012, years in which we did not generate positive
free cash flow.
Total revenue for the year amounted to US$930.2 million which was in line with
2013 despite the lower average realised gold price as sale ounces for 2014
exceeded prior year sales by 9%. EBITDA increased by 5% to US$252.7 million in
2014 mainly due to a US$26.1 million reduction in gross direct mining costs,
reflected in the 10% reduction of cash costs to US$732 per ounce sold.
Earnings for the year were US$90 million, or US 22.1 cents per share. These
were impacted by significant revaluations of our indirect tax balance held in
Tanzanian shillings and out of the money oil hedges partially offset by
deferred taxation changes at Buzwagi.
Our Approach
Our new approach to operating our assets has focused on three key pillars: Our
Business, Our People and Our Relationships. We have made significant technical
changes to Our Business, to ensure that each of our mines are correctly
engineered and set up to deliver free cash flow:
â€' At Bulyanhulu, we have changed to a mechanised mining method,
with long hole stoping becoming the prime mining method replacing labour
intensive conventional hand-held mining. This is both safer and more cost
effective than previous hand-held methods. We have also brought in contractors
to accelerate development of the Upper East and Lower West Zones in the mine
which will improve our mining flexibility and allow us to mine at our reserve
grade. During the year we also commissioned the CIL Plant Expansion at the
mine which will provide incremental low cost ounces from the reprocessing of
tailings.
â€' At North Mara, we are moving forward with the creation of an
underground operation at one of the mine's open pits, having had the project
approved by the Board in Q4 2014. The Gokona Underground project is expected
to produce 450,000 ounces of gold over a 5 year life of mine, with an AISC of
less than US$750 per ounce sold. We believe that this will be more profitable
than open pit mining and will have a much lower impact on the surrounding
communities.
â€' At Buzwagi, we shortened the life of the mine so that we are
mining only profitable ounces. Our mine plan now produces positive cash flow
over each year of its remaining life.
Our second pillar is Our People, who are our core asset. We have significantly
reduced the levels of management, restructured our corporate offices,
commenced a new cultural transformation programme (Tufanikiwe Pamoja /
Together We Succeed) and introduced a behavioural safety programme (Tunajali /
We Care). We are focused on creating a high performance culture where our
people are held accountable, but are given the tools to succeed. As part of
this process we have already uncovered real talent within the workforce as
well as seeing talented people returning to Acacia.
The final pillar is Our Relationships, which we have been focused on improving
with the communities around our mines and with the Government. We have engaged
more actively in the community, the media and our broader stakeholders. We
have also worked hard to build our relationships with local and national
Government officials to ensure that we receive the appropriate support for our
business to continue to be a key economic development driver for our host
countries.
Expanding our Footprint
We continue to look to enhance our portfolio of assets, and during 2014 made
our first entry into West Africa by entering into an earn-in agreement over
the South Houndé Project in Burkina Faso. We believe that exploration is a
significant driver of value for the business over the long term and now is the
time to invest, which is a contrarian view to many in the market. The earn-in
allows us to earn an interest of up to 75% over a four year period in the
highly prospective project which already includes a 1.5Moz Au Inferred
resource.
We also had a successful year within our existing exploration portfolio, with
the drilling programmes at Bulyanhulu leading to the addition of 2.3Moz of
gold into resources at very competitive costs. This is approximately half of
our three year target to add 5Moz of gold resources at the mine as we look to
ensure that production matches the geological endowment at Bulyanhulu. We also
made good progress in Kenya with an extensive and successful aircore drilling
programme across the land package which is now being followed up with deeper
drilling.
We will continue to look for further exploration acreage in West Africa as
well as other opportunities to drive shareholder value.
Safety
It is with sadness that I report that we experienced a fatality during the
year, with Emmanuel Mrutu, an underground miner at Bulyanhulu, passing away
after having been fatally injured in a fall of ground incident at the mine in
March. We fully investigated the incident and have implemented a number of
recommendations to prevent re-occurrence. Safety is something I am passionate
about and having been involved in underground mining for over 20 years, I am
well aware of the risks. One of the key projects we started during the year
was "Tunajali" or "We Care", a behavioural safety programme designed to embed
the culture of safety, rather than just relying on checks and processes. This
programme has now been rolled out across all of our operations and we are
beginning to see the benefits in our on-going safety statistics. We continue
to target zero injuries and having every person going home safely every day.
Indirect Taxes
Further progress has been made with respect to the build-up of VAT, and the
Company received net refunds of US$2.6 million during the fourth quarter,
bringing total net refunds for 2014 to approximately US$41 million. Total
gross refunds received in 2014 amounted to US$132.8 million. We have also
continued discussions with the Tanzanian Government on the establishment of an
appropriate mechanism to safeguard the recoverability of VAT payments over the
long term. These are centred around the establishment of an escrow account for
VAT paid on domestic goods, similar to that currently used to provide for the
refunding of VAT paid on imports and our discussions are on-going. As at 31
December 2014, the outstanding amount relating to the total indirect tax
receivable, not covered by the 2011 Memorandum of Settlement, stood at US$46
million, roughly US$49 million lower than 31 December 2013.
Barrick Gold shareholding
In March 2014, our majority shareholder Barrick Gold sold 10% of Acacia's
outstanding share capital to institutional shareholders. The placing was
priced at 275 pence and reduced Barrick's shareholding to 63.9%. This was a
positive step by Barrick and increased our free float by around 40% which led
to a subsequent increase in trading liquidity.
Final dividend
The Board of Directors is pleased to announce the approval of a final dividend
for 2014 of US2.8 cents per share, an increase of 40% when compared to 2013.
Subject to shareholders approving this recommendation at the AGM on 23 April
2015, the final dividend will be paid on 29 May 2015 to shareholders on the
register as of 8 May 2015. The ex-dividend date is 7 May 2015. Together with
our interim dividend of US1.4 cents per share, this represents a payout level
of 19% of cash flow as defined by our dividend policy.
Outlook
The focus for 2015 is to continue to deliver free cash flow from
our high quality portfolio of mines as we work to enable them to deliver to
their full geological potential. We have implemented changes across our
business in order to continue to drive cost reductions and production growth.
We are focused on continued delivery operationally in order to drive free cash
flow, of which 15-30% is expected to be returned to shareholders via
dividends, with the remainder appropriately allocated across further capital
returns, organic growth or acquisition opportunities.
We successfully overcame challenges to the business in 2014 and
expect that 2015 will present similar challenges as we seek to successfully
deliver on the turnaround at Bulyanhulu, move into commercial ore production
from the Gokona Underground at North Mara and ensure that we maintain our
strengthened relationships with all stakeholders and the Government.
For 2015 we expect to see increased production of between 750,000
to 800,000 ounces of gold. Production at each of the mines is expected to
remain in line with Q4 2014 during the first quarter, with the bulk of the
increase in production expected to be realised in the second half of the year.
At the mine level, we expect a significant ramp up at Bulyanhulu as
we move through the year driven by an improvement in head grade, incremental
production from the Upper East Zone and an increased contribution from the
expanded CIL circuit. At Buzwagi, production is expected to be broadly in line
with 2014 as we continue to operate around the reserve grade of the asset. At
North Mara, head grade is expected to decline marginally as the Gokona pit
transitions from an open pit to underground operation, leading to an increased
proportion of ore being sourced from the lower grade Nyabirama pit during the
year. This will be partially offset by the higher grade ore from underground.
As a result we expect to see a corresponding reduction in production at the
mine.
We are targeting further reductions to our unit costs in 2015,
predominantly driven by the incremental production at Bulyanhulu, and estimate
the cash cost per ounce for the year, including royalties, will be between
US$695-725 per ounce sold, a reduction of up to 5% on 2014.
For 2015 we expect overall capital expenditure of between U$220
million - US$240 million, a further reduction on 2014 as we enforce stringent
capital controls and move closer to industry average per ounce spend. We
expect sustaining capital of US$90 million - US$100 million as we scale up
operations at Bulyanhulu and set up the long term future at North Mara; with
capitalised development, inclusive of deferred stripping of US$125 million -
US$135 million. This is driven by increased development activity at Bulyanhulu
which commenced in 2014 focused on opening additional mining areas, and at
North Mara as work accelerates on the Gokona Underground project. The increase
in spend is partially offset by a reduction in capital requirements at Buzwagi
as it moves towards the end of mining activity. Expansionary capital of US$5
million relates to additional underground drilling at Bulyanhulu aimed at
increasing the scale of the ore body as well as expansionary drilling at North
Mara, predominantly under the Nyabirama pit.
As a result of the above, coupled with flat corporate
administration costs, we estimate all-in sustaining cost per ounce sold for
the year will be between US$1,050 - US$1,100, a reduction of up to 5% on 2014.
The evolution of these costs during the year will be driven by our production
profile and as a result we expect to see lower costs in the second half than
the first.
Finally, I would like to thank all of my colleagues for their
commitment, enthusiasm and hard work throughout what has been a transformative
year for Acacia. I am delighted by our progress to date, and am driven by the
opportunity to make this company a leader in Africa. I would also like to
thank our Board for their support and guidance through the year and I am very
much looking forward to 2015 and beyond.
Brad Gordon
Chief Executive Officer
Key statistics - restated to reflect Tulawaka as a discontinued operation
Three months ended 31 December Year ended 31 December
(Unaudited) 2014 20133 2014 20133
Tonnes mined (thousands of tonnes) 10,776 11,570 41,684 54,076
Ore tonnes mined (thousands of tonnes) 2,281 2,151 8,170 7,225
Ore tonnes processed (thousands of tonnes) 2,405 1,817 8,413 7,914
Process recovery rate (percent)* 85.5% 88.5% 88.0% 88.4%
Head grade (grams per tonne)* 2.7 3.2 3.0 2.8
Gold production (ounces) 181,084 165,375 718,651 637,002
Gold sold (ounces) 194,243 168,167 703,680 643,597
Copper production (thousands of pounds) 3,107 3,548 14,068 11,970
Copper sold (thousands of pounds) 3,815 3,010 13,448 11,570
Cash cost per tonne milled (US$/t)1,4 60 72 61 66
Per ounce data
Average spot gold price2 1,201 1,276 1,266 1,411
Average realised gold price1 1,194 1,251 1,258 1,379
Total cash cost1 744 774 732 812
All-in sustaining cost1 1,088 1,163 1,105 1,346
Average realised copper price (US$/lb) 2.80 3.31 3.01 3.24
Financial results - restated to reflect Tulawaka as a discontinued operation
Three months ended 31 December Year ended 31 December
(Unaudited, in US$'000 unless otherwise stated) 2014 20133 2014 20133
Revenue 243,861 221,603 930,248 929,004
Cost of sales (191,732) (169,770) (688,278) (713,806)
Gross profit 52,129 51,833 241,970 215,198
Corporate administration (10,274) (8,273) (32,685) (33,970)
Share based payments (2,416) (625) (8,388) 1,813
Exploration and evaluation costs (4,331) (5,979) (18,284) (16,927)
Corporate social responsibility expenses (3,412) (3,667) (10,787) (12,237)
Impairment charges - (133,320) - (1,044,310)
Other charges (21,509) (8,995) (47,921) (30,424)
Profit/(loss) before net finance expense and taxation 10,187 (109,026) 123,905 (920,857)
Finance income 385 598 1,324 1,670
Finance expense (3,182) (2,462) (10,043) (9,552)
Profit/(loss) before taxation 7,390 (110,890) 115,186 (928,739)
Tax credit/(expense) 13,906 19,232 (25,977) 187,959
Net profit/(loss) from continuing operations 21,296 (91,658) 89,209 (740,780)
Discontinued operations:
Net (loss)/gain from discontinued operations (160) (8,684) 726 (57,653)
Net profit/(loss) for the year 21,136 (100,342) 89,935 (798,433)
Attributed to:
Owners of the parent (net earnings/(loss)) 21,136 (97,700) 90,402 (781,101)
- Continuing operations 21,296 (91,658) 89,209 (740,780)
- Discontinued operations (160) (6,042) 1,193 (40,321)
Non-controlling interests - (2,642) (467) (17,332)
- Discontinued operations - (2,642) (467) (17,332)
1 These are non-IFRS financial performance measures with no
standard meaning under IFRS. Refer to"Non IFRS measures"' on page 25 for
definitions.
2 Reflect the London PM fix price.
3 Restated for the reclassification of Tulawaka as a discontinued
operation.
4 Cash cost per tonne milled excluding the reprocessing of tailings
at Bulyanhulu amounted to US$69 per tonne for the quarter and US$65 for the
year ended 31 December 2014.
*Reported process recovery rates and head grade include tailings retreatment
at Bulyanhulu. Excluding the impact of the tailings retreatment Q4 and FY14
process recovery would be 87.4% and 88.9% respectively, with Q4 and FY14 head
grade being 3.1g/t and 3.2g/t respectively
For further information, please visit our website:
www.acaciamining.com or contact:
Acacia Mining plc +44 (0) 207 129 7150
Brad Gordon, Chief Executive Officer
Andrew Wray, Chief Financial Officer
Giles Blackham, Investor Relations Manager
Bell Pottinger +44 (0) 203 772 2500
Daniel Thöle
About Acacia Mining plc
Acacia Mining plc (LSE:ACA), formerly African Barrick Gold, is Tanzania's
largest gold miner and one of the largest producers of gold in Africa. We have
three producing mines, all located in Northwest Tanzania: Bulyanhulu, Buzwagi,
and North Mara and a portfolio of exploration projects in Tanzania, Kenya and
Burkina Faso.
Our approach is focused on strengthening our three core pillars; our business,
our people and our relationships. Our name change from African Barrick Gold to
Acacia Mining reflects a new approach to mining, and an ambition to create a
leading African Company.
Acacia Mining is a UK public company headquartered in London. We
are listed on the Main Market of the London Stock Exchange with a secondary
listing on the Dar es Salaam Stock Exchange. Barrick Gold Corporation remains
our majority shareholder. Acacia Mining reports in US dollars and in
accordance with IFRS as adopted by the European Union, unless otherwise stated
in this announcement.
Conference call
A presentation will be held for analysts and investors on 16
February 2015 at Noon London time.
For those unable to attend, an audio webcast of the presentation
will be available on our website www.acaciamining.com. For those who wish to
ask questions, the access details for the conference call are as follows:
Participant dial in: +44 (0) 203 003 2666 / +1 866 966 5335
Password: Acacia
FORWARD- LOOKING STATEMENTS
This report includes "forward-looking statements" that express or
imply expectations of future events or results. Forward-looking statements are
statements that are not historical facts. These statements include, without
limitation, financial projections and estimates and their underlying
assumptions, statements regarding plans, objectives and expectations with
respect to future production, operations, costs, projects, and statements
regarding future performance. Forward-looking statements are generally
identified by the words "plans," "expects," "anticipates," "believes,"
"intends," "estimates" and other similar expressions.
All forward-looking statements involve a number of risks,
uncertainties and other factors, many of which are beyond the control of
Acacia, which could cause actual results and developments to differ materially
from those expressed in, or implied by, the forward-looking statements
contained in this report. Factors that could cause or contribute to
differences between the actual results, performance and achievements of Acacia
include, but are not limited to, changes or developments in political,
economic or business conditions or national or local legislation or regulation
in countries in which Acacia conducts - or may in the future conduct -
business, industry trends, competition, fluctuations in the spot and forward
price of gold or certain other commodity prices (such as copper and diesel),
currency fluctuations (including the US dollar, South African rand, Kenyan
shilling and Tanzanian shilling exchange rates), Acacia's ability to
successfully integrate acquisitions, Acacia's ability to recover its reserves
or develop new reserves, including its ability to convert its resources into
reserves and its mineral potential into resources or reserves, and to process
its mineral reserves successfully and in a timely manner, Acacia`s ability to
complete land acquisitions required to support its mining activities,
operational or technical difficulties which may occur in the context of mining
activities, delays and technical challenges associated with the completion of
projects, risk of trespass, theft and vandalism, changes in Acacia`s business
strategy including, the ongoing implementation of operational reviews, as well
as risks and hazards associated with the business of mineral exploration,
development, mining and production and risks and factors affecting the gold
mining industry in general. Although Acacia`s management believes that the
expectations reflected in such forward-looking statements are reasonable,
Acacia cannot give assurances that such statements will prove to be correct.
Accordingly, investors should not place reliance on forward-looking statements
contained in this report.
Any forward-looking statements in this report only reflect
information available at the time of preparation. Subject to the requirements
of the Disclosure and Transparency Rules and the Listing Rules or applicable
law, Acacia explicitly disclaims any obligation or undertaking publicly to
update or revise any forward-looking statements in this report, whether as a
result of new information, future events or otherwise. Nothing in this report
should be construed as a profit forecast or estimate and no statement made
should be interpreted to mean that Acacia`s profits or earnings per share for
any future period will necessarily match or exceed the historical published
profits or earnings per share of Acacia.
LSE: ACA
TABLE OF CONTENTS 2014 Operating Review 8
Exploration Review 12
Financial Review 15
Going Concern Statement 24
Non-IFRS measures 25
Risk Review 27
Condensed Financial Information: - Consolidated Income Statement and Consolidated Statement of Comprehensive Income 29/30
- Consolidated Balance Sheet 31
- Consolidated Statement of Changes in Equity 32
- Consolidated Statement of Cash Flows 33
- Notes to the Condensed Financial Information 34
2014 Operating Review
We made good progress across our assets in 2014 delivering
production for the year of 718,651 ounces, an increase of 13% year on year,
together with a 10% decrease in cash costs and an 18% decrease in AISC.
Increased production drove a 9% increase in sales volumes to 703,680 ounces.
Operationally, North Mara's production of 273,803 ounces was 7%
higher than the prior year due to improved throughput rates. AISC fell by 23%
to US$947 per ounce sold predominantly due to lower capitalised development
and sustaining capital expenditure together with the impact of increased sales
volumes. During Q4 2014, our Board approved the Gokona Underground project
which is expected to produce 450,000 ounces of gold over a 5 year life of
mine, with an AISC of below US$750 per ounce sold. This project is now moving
into the execution phase and is expected to deliver first stoping ore in the
first half of 2015.
Bulyanhulu saw an 18% increase in production to 234,786 ounces due
to an improved run of mine grade (8.7g/t) as a result of access to higher
grade stopes, coupled with higher throughput from the processing of reclaimed
tailings which delivered 12,405 ounces of production. This was partially
offset by lower recoveries as a result of underperformance of the elution
circuit which led to increased tailings losses. AISC was down by 6% to
US$1,266 per ounce sold as cost savings were partially offset by an investment
in underground development to drive the grade improvement.
At Buzwagi, gold production for the year of 210,063 ounces was 15%
higher than 2013, due to improved head grade as a result of mining in the main
ore zone and increased recoveries due to business improvement projects. This
was partially offset by a 7% decrease in throughput due to plant downtime for
planned and unplanned maintenance. Changes to the mine plan in 2013 reduced
waste tonnes mined, delivering a 24% reduction in total tonnes mined against
the prior year. The combination of these factors resulted in a reduction in
AISC of 30% to US$1,055 per ounce sold.
Total tonnes mined during the year amounted to 41.7 million tonnes,
a decrease of 23% on 2013 as a result of the changes to mine plans at both
North Mara and Buzwagi. Ore tonnes mined were 8.2 million tonnes compared to
7.2 million in 2013, also as a result of the changes to the mine plans in
2013.
Ore tonnes processed amounted to 8.4 million tonnes, an increase of
6% on 2013 primarily driven by increased throughput at Bulyanhulu and North
Mara partially offset by reduced throughput at Buzwagi.
Head grade for the year of 3.0 g/t was 7% higher than in 2013 (2.8
g/t). This was due to a 13% increase in head grade at Buzwagi and a 12%
increase in run of mine grade at Bulyanhulu, partially offset by the
reprocessing of lower grade tailings at Bulyanhulu.
Our cash costs for the year were 10% lower than in 2013, and
amounted to US$732 per ounce sold. The decrease was primarily due to:
- The impact of the increased production base (US$112/oz);
- Reduction in the workforce (mainly a 28% decrease in the
international workforce compared to the same period in 2013) (US$29/oz); and
- Lower G&A costs driven by lower warehouse related costs and
lower management fee charges given the overall lower corporate cost structure
(US$22/oz).
Partly offset by:
- Lower capitalised development costs at Buzwagi and North Mara as a result
of the revised mine plans driving a lower strip ratio (US$72/oz); and
- Higher maintenance costs at Bulyanhulu and Buzwagi due to
increased maintenance activity as a result of maintenance scheduling and the
impact of maintenance cycles (US$19/oz).
The all-in sustaining cost of US$1,105 per ounce sold for the year
was 18% lower than 2013, predominantly due to lower cash costs as described
above and the impact of higher sales volumes on per unit costs, combined with
an increased production base mainly driven by the improved head grade, lower
sustaining capital expenditure at all sites and lower capitalised development
costs at North Mara and Buzwagi due to the revised mine plans.
As a result of operational and working capital improvements, cash
generated from operating activities in 2014 increased by 55% over the prior
year period to US$289.5 million despite the reduction in the average realised
sales price.
Capital expenditure for the year ended 31 December 2014 amounted toUS$253.8 million compared to US$385.1 million in 2013. Capital expenditure
primarily comprised capitalised development expenditure (US$132.4 million),
including US$21.2 million related to development costs for the Bulyanhulu
Upper East and Lower West projects, investment in the Bulyanhulu CIL Expansion
project (US$44.5 million), component and equipment costs (US$21.8 million) and
investments in tailings and infrastructure (US$32.4 million).
As previously announced, as of 1 January 2015 we have changed our definition
of gold produced. Going forward, we will record only gold poured as production
ounces and will not include changes to our gold-in-circuit ("GIC") ounces.
Whilst we expect GIC to remain relatively stable going forward, we will now
eliminate any potential volatility from movement in GIC levels and would
expect our production ounces to more closely match our sales ounces. This new
definition is included in our expected production levels for 2015.
Mine Site Review
Bulyanhulu
Key statistics
Three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Key operational information:
Ounces produced oz 66,033 53,186 234,786 198,286
Ounces sold oz 63,166 56,735 215,740 195,304
Cash cost per ounce sold1 US$/oz 772 776 812 890
AISC per ounce sold1 US$/oz 1,225 1,118 1,266 1,344
Copper production Klbs 1,370 1,348 5,289 4,855
Copper sold Klbs 1,425 1,304 4,925 4,508
Underground ore tonnes hoisted Kt 245 222 909 872
Run-of-mine processing:
Ore milled Kt 245 229 906 871
Head grade g/t 9.0 7.9 8.7 7.8
Mill recovery % 83.8% 91.2% 88.0% 90.9%
Ounces produced oz 58,998 53,186 222,381 198,286
Cash cost per tonne milled1 US$/t 199 193 193 200
Reprocessed tailings:
Ore milled Kt 390 - 617 -
Head grade g/t 1.0 - 1.1 -
Mill recovery % 59.4% - 56.9% -
Ounces produced oz 7,035 - 12,405 -
Capital Expenditure
- Sustaining capital US$('000) 9,936 4,333 23,388 25,193
- Capitalised development US$('000) 14,210 10,750 60,151 45,428
- Expansionary capital US$('000) 6,272 41,581 48,010 114,912
30,418 56,664 131,549 185,533
- Non-cash reclamation asset adjustments US$('000) (181) (5) 6,141 (10,044)
Total capital expenditure US$('000) 30,237 56,659 137,690 175,489
- These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to"Non IFRS measures"' on page 24 for definitions.
Operating performance
Full year gold production of 234,786 ounces was 18% higher than the
prior year due to improved run of mine grade. This was driven by increased
access to higher grade stopes coupled with higher throughput as a result of
the processing of tailings. This was partially offset by lower recoveries as a
result of underperformance of the elution circuit which led to increased
tailings losses. Gold ounces sold of 215,740 ounces were 10% higher than 2013
primarily due to the higher production base, but were lower than production
for the year due to strong production late in Q4 impacting on the timing of
sales and a build-up in gold in circuit as the new CIL circuit was
commissioned.
Copper production of 5.3 million pounds for the year was 9% higher
than in 2013 due to higher copper grades combined with higher run of mine
throughput.
Cash costs for the year of US$812 per ounce sold were 9% lower than
the prior year of US$890, driven by the higher production base, combined with
savings in labour costs mainly due to a reduction in the international
workforce, lower general administration costs primarily resulting from lower
management fees and increased capitalised development costs driven by
development acceleration projects. This was partially offset by higher
contractor costs incurred for ore development and higher energy costs mainly
as a result of the increased processing activity with the new CIL circuit now
fully commissioned.
AISC per ounce sold for the year of US$1,266 was 6% lower than in
2013 (US$1,344), as lower cash costs and sustaining capital expenditure were
partially offset by the investment in capitalised development.
The new CIL circuit was commissioned during the second half of 2014
with the first gold pour taking place in August 2014. Production for the year
from reprocessed tailings amounted to 12,405 ounces, lower than planned as a
result of delays in construction completion, issues experienced in the elution
circuit performance and the detoxification of the tailings. The project to
accelerate the retreatment of the historic higher grade tailings in preference
to the rougher tailings was completed and commissioning trials have commenced.
In 2014 a key focus was on the accelerated development of the Upper
East and Lower West zones to provide increased mining flexibility and to
ensure the mine is able to deliver to its geological potential. In order to
achieve this, a specialist development contractor was engaged in April. During
the year total development costs incurred for the two initiatives (expensed
and capitalised) were US$21.2 million, and this is included in the Bulyanhulu
and Group AISC figures. During the fourth quarter initial development ore from
both zones was delivered to the mill.
Capital expenditure for the year before reclamation adjustments
amounted to US$131.5 million, 29% lower than the 2013 expenditure of US$185.5
million, mainly driven by lower expansionary capital spend as the new CIL
circuit was completed in 2014. Capital expenditure for 2014 consisted mainly
of capitalised underground development costs (US$60.2 million including
US$21.2 million related to development costs for the Bulyanhulu Upper East
Lower West projects) and expansionary capital investment relating to the new
CIL circuit (US$44.5 million).
Buzwagi
Key statistics
Three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Key operational information:
Ounces produced oz 44,398 51,830 210,063 181,984
Ounces sold oz 55,316 50,382 213,399 187,348
Cash cost per ounce sold1 US$/oz 818 941 791 945
AISC per ounce sold1 US$/oz 990 1,300 1,055 1,506
Copper production Klbs 1,738 2,200 8,780 7,115
Copper sold Klbs 2,390 1,706 8,523 7,062
Mining information:
Tonnes mined Kt 6,878 7,244 24,510 32,177
Ore tonnes mined Kt 1,248 1,250 4,692 3,753
Processing information:
Ore milled Kt 1,052 945 4,086 4,400
Head grade g/t 1.4 1.9 1.7 1.5
Mill recovery % 94.2% 88.8% 92.4% 88.2%
Cash cost per tonne milled1 US$/t 43 50 41 40
Capital Expenditure
- Sustaining capital US$('000) 4,225 4,309 12,817 31,589
- Capitalised development US$('000) 2,759 10,812 31,357 60,136
6,984 15,121 44,174 91,725
- Non-cash reclamation asset adjustments US$('000) (1,318) (2,318) (1,131) (9,230)
Total capital expenditure US$('000) 5,666 12,803 43,043 82,495
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to"Non IFRS measures"' on page 24 for definitions.
Operating performance
Gold production for the year of 210,063 ounces was 15% higher than
2013, driven by improved head grade as a result of mining in the main ore zone
and increased recoveries due to business improvement projects. This was
partially offset by a 7% decrease in throughput due to plant downtime for both
planned and unplanned maintenance. Gold sold for the year amounted to 213,399
ounces, 14% above that of 2013 due to the higher production and 2% above
production due to the sale of ounces on hand at the start of the year.
Recoveries increased by 5% over 2013 as a result of business
improvement initiatives in the second half of the year providing improved
blending and management of the CIL plant's performance, coupled with the
increased head grade.
Total tonnes mined for the year of 24.5 million tonnes were 24%
lower than in 2013 due to changes in the mine plan compared to 2013, as
already reported.
Copper production of 8.8 million pounds for the year was 23% higher
than in 2013 driven by the higher concentrate production and higher copper
grades.
Cash costs for the year of US$791 per ounce sold were 16% lower
than in 2013 (US$945). Cash costs were positively impacted by a higher
production base and savings driven by lower contracted services costs due to
lower rates, lower energy costs which in turn were affected by lower
self-generation as a result of improved TANESCO reliability, lower labour
costs as a result of the reduction in the international workforce and lower
corporate costs incurred and allocated to site. This was partially offset by
lower capitalised development costs as a result of the change in the mine
plans and increased maintenance costs driven by equipment breakdowns and plant
maintenance.
AISC per ounce sold for the year of US$1,055 was 30% lower than in
2013 (US$1,506). This was driven by the lower cash cost base and lower
capitalised development and sustaining capital expenditure.
Capital expenditure for the year before reclamation adjustments, of
US$44.2 million was 52% lower than in 2013 (US$91.7 million). The significant
change to the mine plan communicated in 2013 reduced required investment in
waste movement and sustaining capital. Key capital expenditure for the year
included capitalised stripping costs (US$31.4 million), investment in tailings
and infrastructure (US$7.0 million) and component change out costs (US$5.4
million).
North Mara
Key statistics
Three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Key operational information:
Ounces produced oz 70,655 60,358 273,803 256,732
Ounces sold oz 75,760 61,050 274,540 260,945
Cash cost per ounce sold1 US$/oz 668 636 623 659
AISC per ounce sold1 US$/oz 912 1,075 947 1,227
Mining information:
Tonnes mined Kt 3,653 4,104 16,265 21,027
Ore tonnes mined Kt 788 678 2,569 2,601
Processing information:
Ore milled Kt 718 643 2,804 2,643
Head grade g/t 3.5 3.4 3.5 3.5
Mill recovery % 86.9% 86.0% 87.2% 86.8%
Cash cost per tonne milled1 US$/t 70 60 61 65
Capital Expenditure
- Sustaining capital US$('000) 4,967 3,562 18,049 38,386
- Capitalised development US$('000) 4,674 13,651 40,900 65,594
- Expansionary capital US$('000) 5,604 445 13,126 949
15,245 17,658 72,075 104,929
- Non-cash reclamation asset adjustments US$('000) 12,219 (4,506) 16,003 (11,271)
Total capital expenditure US$('000) 27,464 13,152 88,078 93,658
-These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to"Non IFRS measures"' on page 24 for definitions.
Operating performance
Production for the year of 273,803 ounces was 7% higher than the
prior year primarily as a result of higher throughput rates, which exceeded
the prior year period by 6%. The higher milled tonnes were due to business
improvement initiatives in both the mining and milling areas. Gold ounces sold
for the year of 274,540 ounces were in line with production, and 5% higher
than the prior year due to the higher production base.
Cash costs for the year of US$623 per ounce sold were 5% lower than
in 2013 (US$659). Cash costs were positively impacted by the higher production
base, lower labour costs as a result of the reduction in the international
workforce and lower management fees, partially offset by lower capitalised
mining costs due to changes in the mine plan compared to 2013.
AISC per ounce sold for the year of US$947 was 23% lower than in
2013 (US$1,227) predominantly due to lower cash costs, capitalised development
and sustaining capital expenditure in combination with the impact of increased
sales volumes.
During Q4 2014, the Acacia Board approved the Gokona Underground
project which is expected to produce 450,000 ounces of gold over a 5 year life
of mine, with an AISC of below US$750 per ounce sold. This project is now
moving into the execution phase with the underground exploration portal, which
will help to develop a better understanding of the ore body. As at 31 December
2014 the portal was 301 metres advanced and it is expected to encounter
development ore in the first quarter of 2015. Following the Board approval
future capital expenditure will be classified as either sustaining capital or
capitalised development and is expected to amount to US$30 million in 2015.
The total expansionary capital spend on the project in 2014 amounted to
US$13.1 million.
Capital expenditure for the year before reclamation adjustments of
US$72.1 million was 31% lower than in 2013 (US$104.9 million), due to lower
capitalised development and lower sustaining capital expenditure, partially
offset by higher expansionary expenditure. Key capital expenditure included
capitalised stripping costs (US$40.9 million), investments in component costs
(US$10.2 million) and tailings and infrastructure ($7.1 million).
Exploration Review
Introduction
Overall, 2014 was a successful year of execution and delivery
across our greenfield and brownfield exploration projects. During the year,
US$18.3 million of exploration activities were expensed, with a further amount
of US$2.2 million relating to exploration and evaluation activities being
capitalised. Key highlights included our entry into highly prospective acreage
in Burkina Faso, successful drilling at our greenfield joint venture projects
in Kenya, and further successful drilling results from our brownfield
exploration projects at Bulyanhulu from both surface and underground drilling.
Brownfield Exploration
In 2014, near-mine brownfield exploration successfully identified
extensions to known resources. The brownfield exploration programme was
entirely focused on the Bulyanhulu ore body where surface and underground
diamond core drilling returned excellent results from step-out resource
drilling on both Reef 1 and Reef 2 mineralised systems. This work has led to
the inclusion of a total of 2.3Moz to Indicated and Inferred resources and has
extended the resource envelope by 1.5 kilometres to the West.
Bulyanhulu
During 2014, Bulyanhulu undertook two diamond core exploration programmes, one
from surface targeting Western extensions of both the Reef 1 and Reef 2 veins
series, and the second from underground, targeting depth extensions of Reef 2
in the East of the mine.
Lower West Programme - Surface
The programme was designed to test the extensions of the Reef 1 structure from
400 metres to 1,200 metres west of the current Bulyanhulu resource where
historic drilling had shown indications of further gold mineralisation.
Additionally, holes were also drilled to intersect the Reef 2 vein series, and
provide support that the Reef 2 system is mineralised up to 2 kilometres west
of the currently delineated underground resources.
A total of 9,721 metres of diamond core was drilled from surface holes during
2014, bringing the total for the programme to 14,373 metres in a total of 16
holes. Results from the drilling successfully showed the continuation of
high-grade gold mineralisation in the narrow reef-style structures in the
western areas of both the Reef 1 and Reef 2 series. Better results from the
programme, which have all previously been reported, included significant
intersections of:
Reef 1
- BGMDD0054W1: 0.70m @ 18.7g/t Au from 1,435m - Reef 1
- BGMDD0054W2: 1.0m @ 23.8g/t Au from 1,640m - Reef 1
- BGMDD0055W3: 0.79m @ 7.00g/t Au from 1,059m - Reef 1
- BGMDD0056W2: 1.25m @ 16.5g/t Au from 1,550m - Reef 1
Reef 2 Series
- BGMDD0054: 2.0m @10.7g/t Au from 1,174m - Reef 2 series
- BGMDD0054: 0.5m @ 37.9g/t Au from 1,335m - Reef 2 series
- BGMDD0054W2: 1.02m @ 24.2g/t Au from 1,034m - Reef 2 series
- BGMDD0054W6: 0.50m @ 31.1g/t Au from 681m - Reef 2 series
- BGMDD0056W1: 0.50m @ 94.6g/t Au from 805m - Reef 2 series
- BGMDD0056W2: 2.25m @ 26.6g/t Au from 906m - Reef 2 series
The results from 2013/2014 surface drilling programme have been
very positive and demonstrated that gold mineralisation, particularly on the
Reef 2 vein system, continues west of the mine, which opens the potential for
a significant resource expansion on the Reef 2 series at relatively shallow
levels (<1,000-1,600m) compared to the Reef 1 system.
East Deeps Underground Drilling
The programme targeted extensions of the East Zone high-grade ore
shoot on the Bulyanhulu Reef 2 system outside of the current resource model.
The programme was drilled from several underground drill platforms with a
total of 3,058 metres of diamond core completed from three holes during 2014,
bringing the total for the programme to 5 holes for 5,598 metres. The results
received during 2014 were all from the Reef 2 series, and included better
intersections of:
- UX4700-405: 1.0m @ 19.0g/t Au from 621m
- UX4700-407: 1.3m @ 76.7g/t Au from 1203m
- UX4700-408: 1.75m @ 13.6g/t Au from 1,042m
- UX4700-410: 0.5m @ 18.4g/t Au from 1167m
These Reef 2 drill intersections prove the continuity, at depth, of
the high-grade East Zone mineralisation, and show that the high-grade shoot
remains open at depth.
Results from both of the drilling programmes were included in the
year end resource and reserve calculations and increased Indicated Resources
by 760koz and Inferred Resources by 1.6Moz for a total addition of 2.3Moz.
Furthermore, the surface programme extended the extent of mineralisation by
1.5km to the west of the previous resource shell.
Future drilling programmes to both infill the area between the
western extension areas and the current Reef 1 and Reef 2 resource areas and
to infill East Deeps area will be completed from underground, by the
Bulyanhulu Mine Geology Group, over the next 3-5 years targeting a further
addition of 3Moz of resources.
Greenfield Exploration
Throughout 2014, we have continued our focus on identifying new
greenfields exploration opportunities to complement our existing exploration
portfolio. We have significantly progressed our understanding of the West
Kenya joint venture properties and have seen very encouraging results from
reconnaissance and diamond core drilling. Additionally, we entered into a
joint venture with Sarama Resources Limited, over a large and highly
prospective land package in the Houndé Belt of Burkina Faso. We continue to
look throughout Africa for opportunities to further enhance and diversify our
exploration portfolio through low cost joint ventures or option agreements.
Kenya
West Kenya Joint Venture Projects
An extensive exploration programme was completed in 2014 across the
entire area of Acacia's West Kenya projects including aircore drilling of
1,171 holes for 42,232 metres, 10,759 soil samples, 1,060km2 of mapping and
190 line kilometres of IP surveys significantly advancing our understanding of
the Busia-Kakamega greenstone belt and developing in excess of 40 new targets
for follow-up work.
Kakamega Dome Camp
Aircore drilling tested several gold-in-soil anomalies along the
"Liranda Corridor" on the south side of the Kakamega Dome. The aircore
programme was completed in H1 2014 and was very successful with 247 holes of
the 992 holes completed since the programme commenced in 2013, returning
anomalous results (>0.1g/t Au) of which 87 holes intersected zones of >0.50g/t
Au. Better results from the 2014 activity included:
- KDAC0312: 3m @ 15.2 g/t Au from 41m and 9m @ 1.71 g/t Au from 62m
- KDAC0617: 6m @ 7.7 g/t Au, including 3m @ 13.7 g/t Au
- KDAC0832: 12m @ 2.77 g/t Au
- KDAC0841: 15m @ 1.94 g/t Au and 6m @ 4.35 g/t Au
- KDAC0858: 6m @ 22.3 g/t Au, including 3m @ 44 g/t Au
- KDAC0877: 12m @ 12.6g/t Au, including 3m @ 46.3 g/t Au
- KDAC 0998: 6m @ 3.20 g/t Au from 105m
The gold mineralisation has been intersected in a variety of rock
types along the Liranda Corridor, which indicates opportunities to test for
different types and styles of gold deposits in this area. The majority of gold
mineralisation intersected to date has been within weathered (oxidised)
bedrock, often associated with quartz veining.
The aircore results are very encouraging given the current line
spacing of the aircore traverses varies between 200 metres and 400 metres and
the average depth of drilling to date is a relatively shallow at approximately
50 metres. In late 2014 we commenced a diamond core drill programme to
investigate the orientation and continuity of gold mineralisation intersected
in the aircore drilling to date. By year end a total of 20 holes had been
completed for 3,709 metres of diamond core. Delays in the transport and
processing of drill core samples over the end-of-year period resulted in a
limited number of results being received and processed through QA/QC
procedures by the period end.
Initial interpretation of diamond core drill results and structural
data indicates that in a number of areas drilling has not intersected the
mineralised interval and subsequently follow-up drill holes have been
re-oriented to assess the geology and mineralised structures at the
appropriate drill angle. A number of scissor holes have now been drilled to
complete this task.
Lake Zone Camp
In tandem with the aircore drilling, we are undertaking gradient
and pole-dipole IP and Resistivity across selected gold-in-soil anomalies
throughout the Lake Zone Camp in the central and western areas of the project.
A total of 190 line kilometres of surveys were completed in 2014. Ten targets
showing distinct resistivity and/or chargeability zones coincident with the
gold-in-soil anomalies have been delineated and should be considered as
priority targets for future drilling programmes. The Abimbo target in the far
west of the West Kenya project area is expected to be the first target tested
in 2015; this target is a Gold-Copper-Molybdenum-Arsenic soil geochemical
anomaly that extends over 6km2 and is co-incident with a large IP anomaly.
Burkina Faso
South Houndé Joint Venture
In November, Acacia entered into an earn-in agreement with Sarama
Resources Ltd ("Sarama") whereby Acacia can earn an interest of up to 70% with
the expenditure of up to US$14 million over a number of staged payments, at
Sarama's highly prospective South Houndé Project in Burkina Faso (the
"Project"). Acacia may increase its interest in the Project to 75% on
satisfaction of certain conditions relating to resource delineation.
The Project comprises seven contiguous exploration licences covering a total
area of 814km2 in South-West Burkina Faso approximately 300km south-west of
Ouagadougou and 90km southeast of Bobo-Dioulasso, the second largest city in
Burkina Faso. Access to the area is via a major sealed bitumen road from
Ouagadougou to Bobo-Dioulasso and then via a network of secondary and tertiary
roads. The Project area is sparsely populated.
Sarama has identified a number of high-quality exploration targets including
the 1.5Moz Au Tankoro Resource. The Tankoro Resource extends over 5.5km strike
within a 25km long mineralised corridor, one of three such mineralised
corridors on the property. Previous exploration including surface
geochemistry, geophysics (IP), aircore and reverse circulation drilling have
defined a number of high quality exploration targets along strike from the
Tankoro resource and on multiple sub-parallel north-northeast trending
corridors within the South Houndé Project.
Going forward, exploration programmes will target high grade extensions to the
existing Tankoro resource base, both along strike and at depth. Regional
programmes will target new high-value discoveries across the Project through
the use of geophysics (IP and aeromagnetic surveys) and extensive drilling
programmes.
The South Houndé JV agreement was signed in November 2014 with an initial
3-month work programme commencing shortly thereafter. By the end of 2014, soil
sampling had commenced on the Tyikoro licence and an induced polarisation (IP)
survey extending the Tankoro IP grid had been completed. Additionally, a total
of 59 aircore holes (3,377 metres), seven reverse circulation holes (944
metres) and two diamond core holes (624 metres) had been completed across
several targets; we expect to release initial results during Q1 2015.
It is anticipated that two diamond rigs and one reverse circulation
rig will be in operation for most of Q1 2015 following up positive aircore
results and IP targets, as well as testing for high-grade plunge extensions to
the MC and MM zones.
Financial Review
The continued strong operational performance during the year was
partially offset by the continuing weak gold price environment in 2014, with
the average realised gold price US$121 per ounce lower than the prior year.
This is reflected in the Acacia Group's financial results for the year ended
31 December 2014:
- Revenue of US$930.2 million was US$1.2 million higher than 2013 driven by an
increase in sales volumes of 60,083 ounces (9%), which offset a 9% decrease in
the average realised gold price to US$1,258 per ounce sold (US$1,379 per ounce
sold in the prior year).
- Cash costs decreased to US$732 per ounce sold from US$812 in 2013, driven by
the higher production base, lower labour costs, lower warehouse costs and
lower corporate costs incurred and allocated to site.
- All-in sustaining costs decreased to US$1,105 per ounce sold from US$1,346
in 2013 due to lower cash costs, lower sustaining capital expenditures and
capitalised development costs combined with the impact of increased sales
volumes on per unit costs.
- EBITDA increased by 5% to US$252.7 million, mainly driven by lower direct
mining costs.
- Operational cash flow of US$289.5 million was 55% higher than 2013,
primarily as a result of reduced operating costs and decreased working capital
investment due to a decrease in other current assets, mainly driven by VAT
refunds received from the Tanzanian Government, an increase in trade payables
due to the timing of payments, partially offset by an investment in gold
inventory and an increase in dore and concentrate receivables.
The following review provides a detailed analysis of our
consolidated results for the year ended 31 December 2014 and the main factors
affecting financial performance. It should be read in conjunction with the
unaudited consolidated financial information and accompanying notes on pages
28 to 46, which have been prepared in accordance with International Financial
Reporting Standards as adopted for use in the European Union ("IFRS").
Market overview
Our financial results are impacted by external drivers in the form
of commodity prices, exchange rates and the cost of energy. Their impact in
2014 and our positioning going into 2015 are set out below.
The market price of gold has a significant impact on Acacia's
operating earnings and its ability to generate cash flows. Gold price
volatility continued to be elevated during 2014 with the gold price ranging
from a high of US$1,385 per ounce to a low of US$1,142 per ounce and closing
the year at US$1,206 per ounce. Market gold prices averaged US$1,266 per ounce
in 2014, a 10% decline from the prior year average of US$1,411.
The price of gold has been influenced by US Dollar strength, low
interest rates worldwide, investment demand and the monetary policies
implemented by major world central banks. Exchange traded fund ("ETF")
outflows were in part met by strong physical demand in Asia with jewellery
demand in China accounting for one third of the world market. Gold is still
viewed as a portfolio diversifier by central banks, which now hold a
significant portion of global bullion reserves and continue to increase
holdings.
As the US economy improved during 2014, the US Federal Reserve
started to taper its bond purchase programme which culminated in September
2014. Equities performed well and the dollar appreciated which together with
divergence in major central bank policies, caused gold prices to be extremely
volatile during 2014.
We continued our policy of no gold hedging during 2014.
Copper
Acacia also produces copper as a co-product which is recognised as
a part of revenue. Copper traded between US$2.86 and US$3.37 per pound in
2014. The average market copper price for 2014 was US$3.11 compared with
US$3.32 per pound in 2013. Key external drivers of the copper prices include
Chinese demand, the world's largest consumer, the US growth outlook, existing
stock levels and supply growth.
During 2014 we utilised an option collar strategy whereby 75% of
our estimated copper production was hedged at an average floor price of
US$3.12 per pound and an average ceiling price of US$3.41 per pound, resulting
in a realised gain of US$408 thousand for the year. In 2015 we have continued
this strategy and put in place floor protection on 24% of our expected copper
production at an average floor price of US$3.08 per pound and an average
ceiling price of US$3.35 per pound.
Fuel
Brent Crude oil traded between US$57 and US$115 per barrel and averaged US$100
per barrel (2013: US$109 per barrel) while trading at around US$58 per barrel
at the end of the year. We consumed approximately 496,000 barrels of diesel in
2014 (2013: 610,000). Diesel fuel is refined from crude oil and is therefore
subject to the same price volatility affecting crude oil prices and has a
significant impact on our production costs. Crude oil has been impacted by the
strength of the US dollar and increased supplies from North America that
resulted in an oversupply. Our overall oil exposure is heavily impacted by
grid power reliability across all three operations and mining activity at our
open pit mines. During 2014 we utilised an option collar strategy to hedge 75%
of our estimated diesel consumption at an average floor price of US$88 per
barrel and average capped price of US$105 per barrel. In 2015 we have
continued this strategy and put in place protection on approximately 75% and
64% of our expected 2015 and 2016 consumption respectively with average floors
of US$97 and US$69 and a capped price of US$110 and US$90 per barrel
respectively.
Currency Exchange rates
A portion of Acacia's expenditure is incurred in currencies other
than US dollars. The exposure relating to other currencies is approximately
26% of the Company's total expenditure, of which the main contributing
currencies are the Tanzanian shilling and the South African rand. In 2014, the
rand declined significantly against the US dollar as the US dollar
strengthened, domestic factors persisted and investors shunned riskier
rand-denominated assets. The Tanzanian shilling remained relatively stable as
the Bank of Tanzania imposed exchange controls throughout the year. We have
put in place floor protection on approximately 75% of our expected rand
operating expenditures for 2015 with average floors of ZAR10.43. In light of
potential rand weakness we have average ceilings of ZAR12.80 for 2015.
Discontinued operation - Tulawaka
Following the acquisition of Tulawaka by STAMICO in February 2014, the
financial results of Tulawaka have been presented as discontinued operations
in the consolidated financial information. The comparative results in the
consolidated income statement have been presented as if Tulawaka had been
discontinued from the start of the comparative period, effectively excluding
the net result relating to Tulawaka from individual income statement lines and
aggregating it in one line called "Net profit/(loss) from discontinued
operations". A reconciliation to group results is set out on page 20.
The financial performance below is stated for continuing operations.
Revenue
Revenue for 2014 of US$930.2 million was in line with 2013. The 9%
increase in sales volumes (60,083 ounces) was more than offset by a 9%
decrease in the realised gold prices from US$1,379 per ounce sold in 2013 to
US$1,258 in 2014 as a result of lower market prices. The increase in sales
ounces was due to the higher production base.
Included in total revenue is co-product revenue of US$45.3 million
for 2014, which increased by 5% from the prior year period (US$43.0 million)
due to higher copper sales volumes, partly offset by a lower realised copper
price. The 2014 average realised copper price of US$3.01 per pound compared
unfavourably to that of 2013 (US$3.24 per pound), and was driven by global
market factors regarding supply and demand.
Cost of sales
Cost of sales was US$688.3 million for 2014, representing a
decrease of 4% on the prior year (US$713.8 million). The key aspects impacting
the cost of sales for the year were:
- Lower depreciation and amortisation charges driven by the lower capital base
employed for the year slightly offset by the higher production base; and
- Cost savings across labour, energy and fuel and general
administration costs, combined with an increased investment in gold inventory
relating to ore stockpiles at Buzwagi and gold in circuit.
This was partially offset by:
- A lower proportion of mining costs being capitalised at Buzwagi and North
Mara due to the change in mine plans;
- Higher maintenance costs at Buzwagi and Bulyanhulu due to
increased maintenance activity as a result of a focus on implementing improved
maintenance practices and the impact of maintenance cycles; and
- Higher refining charges due to increased sales ounces.
The table below provides a breakdown of cost of sales:
(US$'000) Three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Cost of Sales
Direct mining costs 138,446 126,826 493,933 508,166
Third party smelting and refining fees 7,228 5,160 24,937 16,790
Royalty expense 10,830 9,396 41,284 40,871
Depreciation and amortisation 35,228 28,388 128,124 147,979
Total 191,732 169,770 688,278 713,806
A detailed breakdown of direct mining expenses is shown in the table below:
(US$'000) Three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Direct mining costs
Labour 32,003 36,757 132,656 152,870
Energy and fuel 29,974 30,565 130,486 133,797
Consumables 27,988 24,612 103,770 104,188
Maintenance 29,977 21,970 104,452 90,926
Contracted services 28,695 24,723 96,785 96,957
General administration costs 17,786 27,842 77,360 92,902
Gross direct mining costs 166,423 166,469 645,509 671,640
Capitalised mining costs (27,977) (39,643) (151,576) (163,474)
Total direct mining costs 138,446 126,826 493,933 508,166
Gross direct mining costs of US$645.5 million for 2014 were 4%
lower than 2013 (US$671.6 million). Individual cost components comprised:
- A 13% reduction in labour costs, mainly as a result a 28% reduction in
international employees across the sites, driven by localisation efforts.
- A 2% reduction in energy and fuel expenses, driven primarily by
lower diesel usage at Buzwagi as a result of reduced mining and processing
activity and less self-generation due to increased reliance on supply from
TANESCO, partially offset by higher costs at Bulyanhulu due to the higher
mining and processing activity coupled with higher TANESCO pricing.
- A 15% increase in maintenance costs, driven by increased
maintenance investment, specifically relating to mining equipment repairs at
Buzwagi and Bulyanhulu, and to improve group maintenance practices.
- A 17% decrease in general administration costs, across all sites
driven by lower warehouse costs combined with lower corporate costs incurred
and allocated to sites.
Capitalised direct mining costs, consisting of capitalised
development costs and the change in inventory charge, is made up as follows:
(US$'000) Three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Capitalised direct mining costs
Capitalised development costs (20,248) (35,254) (122,782) (173,245)
(Investment in)/ drawdown of inventory (7,729) (4,389) (28,794) 9,771
Total capitalised direct mining costs (27,977) (39,643) (151,576) (163,474)
Capitalised development costs were 29% lower than 2013, driven by
the decrease in waste tonnes mined at Buzwagi and North Mara due to the
revised mine plans previously announced. This was in part offset by an
increase in capitalised development costs at Bulyanhulu. The investment in
inventory was US$28.8 million, higher than in 2013 due to a build-up of ore
inventory at Buzwagi due to lower throughput rates and increased gold in
circuit inventory at Bulyanhulu. This was slightly offset by a drawdown of ore
stockpiles at North Mara as a result of the improved throughput rate and plant
performance.
Central costs
Corporate administration expenses totalled US$32.7 million for
2014, a 4% decrease on 2013 (US$34.0 million) driven by further savings in
labour costs as a result of the continued restructuring of the corporate
function and savings in travel costs, partially offset by increased legal
fees. The increase in the share based payment expense was a result of the
stronger share price performance, specifically when compared to our peers,
impacting on the valuation.
Three months ended 31 December Year ended 31 December
(US$'000) 2014 2013 2014 2013
(Unaudited)
Corporate administration 10,274 8,273 32,685 33,970
Stock based payments 2,416 625 8,388 (1,813)
Total central costs 12,690 8,898 41,073 32,157
Exploration and evaluation costs
Exploration and evaluation costs of US$18.3 million were incurred
in 2014, 8% higher than the US$16.9 million spent in 2013. The key focus areas
for 2014 were extension drilling on both Reef 1 and 2 at Bulyanhulu (US$7.2
million), and exploration programmes at the West Kenya Joint Venture project
amounting to US$5.6 million. Also included in exploration costs is US$1.5
million relating to our investment and share of expenses of the South Houndé
project in Burkina Faso.
Corporate social responsibility expenses
Corporate social responsibility costs incurred amounted to US$10.8 million for
the year compared to the prior year of US$12.2 million. The main projects for
2014 related to Village Benefit Implementation Agreements ("VBIAs") at North
Mara and larger contributions to general community projects funded from the
Acacia Maendeleo Fund; of the total spend for 2014, US$8.5 million was spent
on Acacia Maendeleo Fund projects and VBIA's.
Other charges
Other charges amounted to US$47.9 million, 58% higher than 2013
(US$30.4 million). The main contributors were: (i) Acacia's ongoing programme
of zero cost collar contracts as part of a programme to mitigate the negative
impact of copper, rand and fuel cost market volatility. The entry into these
arrangements resulted in a combined mark-to-market revaluation loss of US$13.6
million, due to the fact that these arrangements do not qualify for hedge
accounting combined with a significant decline in the market price of oil,
(ii) non-cash foreign exchange losses mainly related to the indirect tax
receivables due to the weakening of the Tanzanian shilling (US$13.5 million),
(iii) Operational Review costs, including external services and retrenchment
costs of US$13.7 million and (iv) legal costs of US$6.7 million. Refer to note
8 of the condensed financial information for further details.
Finance expense and income
Finance expense of US$10.0 million for 2014 was 5% higher than 2013
(US$9.6 million). The key drivers were accretion expenses relating to the
discounting of the environmental reclamation liability (US$4.7 million) and
US$2.4 million (US$3.1 million in 2013) relating to the servicing of the
US$150 million undrawn revolving credit facility. Other costs include bank
charges and interest on finance leases. Interest costs relating to the project
financing on the Bulyanhulu CIL Plant Expansion project were capitalised to
the cost of the asset up to 30 September 2014 due to the facility being
directly attributable to the asset. For the year ended 31 December 2014 US$2.9
million of borrowing costs have been capitalised to the project. From 1
October 2014, borrowing costs relating to the CIL Bulyanhulu Expansion project
were expensed as the new CIL circuit was fully commissioned. The first
principal repayment for this facility will be made in July 2015.
Finance income relates predominantly to interest charged on
non-current receivables and interest received on money market funds. Refer to
note 9 of the condensed financial information for details.
Taxation matters
The taxation charge was US$26.0 million for 2014, compared to a
credit of US$188.0 million in 2013. The tax charge was made up solely of
deferred tax charges and reflects the impact of the profitability on a
year-to-date basis. The effective tax rate in 2014 amounted to 23% compared to
20% in 2013. The increase is mainly driven by the increase in taxable income
and the utilisation of previously unrecognised tax losses at Buzwagi (US$21.1
million) all recorded in Q4 2014, driven by the mine's anticipated future
profitability as per the revised mine plan.
Net earnings from continuing operations
As a result of the factors discussed above, net profit from
continuing operations for 2014 was US$89.2 million, against the prior year
loss of US$740.8 million. Lower costs of sales and no impairment charges
incurred in 2014 contributed to the variance. This was partially offset by the
higher tax charge and other charges.
Earnings per share
The earnings per share for 2014 amounted to US22.1 cents, an increase of
US212.5 cents from the prior year loss of US190.4 cents. The increase was
driven by increased net profit with no change in the underlying issued shares.
Earnings per share from continuing operations amounted to US21.8 cents.
Discontinued operations
Below is a reconciliation showing Group financial performance on a
line by line basis, with Tulawaka being classified as a discontinued
operations for 2013 and 2014.
Year ended 31 December 2014
(US$'000)
Continuing Discontinued
(Unaudited) operations operations Total
Revenue 930,248 - 930,248
Cost of sales (688,278) - (688,278)
Gross profit/ (loss) 241,970 - 241,970
Corporate administration (32,685) - (32,685)
Share based payments (8,388) - (8,388)
Exploration and evaluation costs (18,284) - (18,284)
Corporate social responsibility expenses (10,787) (118) (10,905)
Impairment charges - - -
Other charges (47,921) 805 (47,116)
Profit/(loss) before net finance expense and
taxation 123,905 687 124,592
Finance income 1,324 77 1,401
Finance expense (10,043) (38) (10,081)
Profit/(loss) before taxation 115,186 726 115,912
Tax (expense)/ credit (25,977) - (25,977)
Net profit/ (loss) 89,209 726 89,935
Year ended 31 December 2013
(US$'000)
Continuing Discontinued
(Unaudited) operations operations Total
Revenue 929,004 13,514 942,518
Cost of sales (713,806) (30,368) (744,174)
Gross profit/ (loss) 215,198 (16,854) 198,344
Corporate administration (33,970) (1,351) (35,321)
Share based payments 1,813 40 1,853
Exploration and evaluation costs (16,927) - (16,927)
Corporate social responsibility expenses (12,237) (3,259) (15,496)
Impairment charges (1,044,310) (16,701) (1,061,011)
Other charges (30,424) (19,442) (49,866)
Profit/(loss) before net finance expense and
taxation (920,857) (57,567) (978,424)
Finance income 1,670 30 1,700
Finance expense (9,552) (116) (9,668)
Profit/(loss) before taxation (928,739) (57,653) (986,392)
Tax (expense)/ credit 187,959 - 187,959
Net profit/ (loss) (740,780) (57,653) (798,433)
Financial position
Acacia had cash and cash equivalents on hand of US$293.9 million as
at 31 December 2014 (US$282.4 million as at 31 December 2013). The Group's
cash and cash equivalents are with counterparties whom the Group considers to
have an appropriate credit rating. Location of credit risk is determined by
physical location of the bank branch or counterparty. Investments are held
mainly in United States dollars, with cash and cash equivalents in other
foreign currencies maintained for operational requirements.
During 2013, a US$142 million facility was put in place to fund the
bulk of the costs of the construction of the Bulyanhulu CIL Plant Expansion
project ("Project"). The Facility is collateralised by the Project, and has a
term of seven years with a spread over Libor of 250 basis points. The seven
year Facility is repayable in equal instalments (bi-annual) over the term of
the Facility, after a two year repayment holiday period. The interest rate has
been fixed at 3.6% through the use of an interest rate swap. The full facility
of US$142 million was drawn in 2013 with the first repayment due in H2 2015.
The above complements the existing undrawn revolving credit
facility of US$150 million which runs until November 2017.
The net book value of property, plant and equipment increased from
US$1.28 billion in December 2013 to US$1.43 billion in December 2014. The main
capital expenditure drivers have been explained in the cash flow used in the
investing activities section below, and have been offset by depreciation
charges of US$124.1 million. Refer to note 12 to the condensed financial
information for further details.
Total indirect tax receivables, net of a discount provision applied
to the non-current portion, decreased from US$159.8 million as at 31 December
2013 to US$108.1 million as at 31 December 2014. The decrease was mainly due
to refunds of US$132.8 million received during 2014, which was partially
offset by a net increase in current VAT receivables of approximately US$81
million. The net deferred tax position decreased from an asset of US$14.9
million as at 31 December 2013 to a liability of US$11.1 million as at 31
December 2014. This was mainly as a result of taxable income in 2014, the
impact of timing differences and the utilisation of previously unrecognised
tax losses at Buzwagi (US$21.1 million), driven by the mine's anticipated
future profitability as per the revised mine plan.
Net assets attributable to owners of the parent increased from
US$1.93 billion in December 2013 to US$2.0 billion in December 2014. The
increase reflects the current year profit attributable to owners of the parent
of US$90.4 million and the payment of the final 2013 dividend of US$8.2
million and the 2014 interim dividend of US$5.7 million.
Cash flow generation and capital management
Cash flow - continuing and discontinued operations
(US$'000) For the three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Cash generated from operating activities 60,993 48,193 289,528 187,115
Cash used in investing activities (50,305) (84,865) (256,992) (386,850)
Cash (used in)/ provided by financing activities (2,616) 30,487 (19,016) 82,322
Increase/ (decrease) in cash 8,072 (6,185) 13,520 (117,413)
Foreign exchange difference on cash (950) (69) (2,079) (1,526)
Opening cash balance 286,728 288,663 282,409 401,348
Closing cash balance 293,850 282,409 293,850 282,409
Cash flow from operating activities was US$289.5 million for 2014,
an increase of US$102.4 million, when compared to 2013 (US$187.1 million). The
increase relates to the increased gold production and improved cost
performance as well as an increase in inflows associated with working capital
of US$61.3 million when compared to 2013. The working capital inflow relates
to a decrease in other current assets of US$28.0 million, mainly driven by VAT
refunds received from the Tanzanian Government and an increase in trade
payables of US$22.7 million due to the timing of payments compared to the
prior year. This was partially offset by an investment in gold inventory of
US$29.2 million and an increase in doré and concentrate receivables of US$10.0
million.
Cash flow used in investing activities was US$257.0 million for
2014, a decrease of 34% when compared to 2013 (US$386.9 million), driven by
lower sustaining capital expenditure at Buzwagi and North Mara, lower
expansionary capital expenditure due to higher spending on the Bulyanhulu CIL
Expansion project in 2013 and lower capitalised development expenditure at
Buzwagi and North Mara.
A breakdown of total capital and other investing capital activities
for the year ended 31 December is provided below:
(US$'000) Year ended 31 December
(Unaudited) 2014 2013
Sustaining capital 53,138 84,474
Expansionary capital 61,136 117,469
Capitalised development 132,408 171,158
Total cash capital 246,682 373,101
Non-cash rehabilitation asset adjustment 21,013 (30,740)
Non-cash sustaining capital1 1,244 11,967
Total capital expenditure 268,939 354,328
Other investing capital
- Non-current asset movement2 (1,323) 13,749
- Cash flow related to the sale of Tulawaka (11,633) -
1 Total non-cash sustaining capital includes the impact of capital
accruals excluded from cash sustaining capital of US$6.9 million as well as FX
adjustments on revaluation of assets.
2 Non-current asset movements relates to the investment in the land
acquisitions reflected as prepaid operating leases and Tanzania government
receivables.
Sustaining capital
Sustaining capital expenditure includes the investment in mine
equipment of US$21.8 million, mainly relating to component change outs at
North Mara and Bulyanhulu and investment in tailings and infrastructure at
Bulyanhulu (US$18.3 million), North Mara (US$7.1 million) and Buzwagi (US$7.0
million).
Expansionary capital
Expansionary capital expenditure consisted mainly of the Bulyanhulu
CIL Expansion project (US$44.5 million) and the Gokona Underground project at
North Mara ($13.1 million).
Capitalised development
Capitalised development capital includes capitalised stripping for
North Mara (US$40.9 million) and Buzwagi (US$31.4 million) and Bulyanhulu
capitalised underground development (US$60.2 million).
Non-cash capital
Non-cash capital was US$22.3 million and consisted mainly of
reclamation asset adjustments (US$21.0 million) and the full year increase in
capital accruals (US$6.9 million), partially offset by the revaluation of Rand
based assets. The reclamation adjustments were driven by changes in estimates
of future reclamation cash flows combined with lower US risk free rates
driving lower discount rates.
Other investing capital
The sale of Tulawaka to STAMICO resulted in a cash payment of the
balance of the rehabilitation fund, less the transaction consideration on
completion and amounted to US$11.6 million. During 2014 North Mara incurred
land purchases totalling US$9.0 million. This was offset by a reduction in
other non-current assets of US$7.4 million.
Cash flow used in financing activities for the year ended 31
December 2014 was an outflow of US$19.0 million, a decrease of US$101.3
million on an inflow of US$82.3 million in 2013. The outflow relates to
payment of the final 2013 dividend of US$8.2 million, payment of the 2014
interim dividend of US$5.7 million and finance lease payments of US$5.1
million.
Dividend
An interim dividend of US1.4 cents per share was paid to
shareholders on 22 September 2014. The Board of Directors have recommended a
final dividend for 2014 of US2.8 cents per share, subject to the shareholders
approving this recommendation at the AGM.
Significant judgements in applying accounting policies and key
sources of estimation uncertainty
Many of the amounts included in the consolidated financial
information require management to make judgements and/or estimates. These
judgements and estimates are continuously evaluated and are based on
management's experience and best knowledge of the relevant facts and
circumstances, but actual results may differ from the amounts included in the
consolidated financial information included in this release. Information about
such judgements and estimation is included in the accounting policies and/or
notes to the consolidated financial statements, and the key areas are
summarised below.
Areas of judgement and key sources of estimation uncertainty that
have the most significant effect on the amounts recognised in the consolidated
financial statements include:
- Estimates of the quantities of proven and probable gold reserves;
- The capitalisation of production stripping costs;
- The capitalisation of exploration and evaluation expenditures;
- Review of goodwill, tangible and intangible assets' carrying
value, the determination of whether these assets are impaired and the
measurement of impairment charges or reversals;
- The estimated fair values of cash generating units for impairment
tests, including estimates of future costs to produce proven and probable
reserves, future commodity prices, foreign exchange rates and discount rates;
- The estimated useful lives of tangible and long-lived assets and
the measurement of depreciation expense;
- Property, plant and equipment held under finance leases;
- Recognition of a provision for environmental rehabilitation and
the estimation of the rehabilitation costs and timing of expenditure;
- Whether to recognise a liability for loss contingencies and the
amount of any such provision;
- Whether to recognise a provision for accounts receivable, a
provision for obsolescence on consumables inventory and the impact of
discounting the non-current element of the indirect tax receivable;
- Recognition of deferred income tax assets, amounts recorded for
uncertain tax positions, the measurement of income tax expense and indirect
taxes;
- Determination of the cost incurred in the productive process of
ore stockpiles, gold in process, gold doré/bullion and concentrate, as well as
the associated net realisable value and the split between the long term and
short term portions;
- Determination of fair value of derivative instruments; and
- Determination of fair value of stock options and cash-settled
share based payments.
Going concern statement
Acacia Group's business activities, together with factors likely to
affect its future development, performance and position are set out in the
operational and financial review sections of this report. The financial
position of Acacia Group, its cash flows, liquidity position and borrowing
facilities are described in the preceding paragraphs of this financial review.
At 31 December 2014, the Group had cash and cash equivalents of
US$293.9 million with a further US$150 million available under the undrawn
revolving credit facility which remains in place until November 2017. Total
borrowings at the end of the year amounted to US$142 million, of which the
first repayment is only repayable in H2 2015.
Included in other current assets are amounts due to the Group
relating to indirect taxes of US$45.9 million which are expected to be
received within 12 months, but these will be offset to an extent by new claims
submitted for input taxes incurred during 2015. The refunds remain dependent
on processing and payments of refunds by the Government of Tanzania.
We expect that the above, in combination with the expected
operational cash flow generated during 2015, will be sufficient to cover the
capital requirements and other commitments for the foreseeable future.
In assessing Acacia Group's going concern status the Directors have
taken into account the above factors, including the financial position of
Acacia Group and in particular its significant cash position, the current gold
and copper price and market expectations for the same in the medium term, and
Acacia Group's capital expenditure and financing plans. After making
appropriate enquiries, the Directors consider that Acacia and Acacia Group as
a whole has adequate resources to continue in operational existence for the
foreseeable future and that it is appropriate to adopt the going concern basis
in preparing the financial statements.
Non-IFRS Measures
Acacia has identified certain measures in this report that are not
measures defined under IFRS. Non-IFRS financial measures disclosed by
management are provided as additional information to investors in order to
provide them with an alternative method for assessing Acacia's financial
condition and operating results. These measures are not in accordance with, or
a substitute for, IFRS, and may be different from or inconsistent with
non-IFRS financial measures used by other companies. These measures are
explained further below.
Average realised gold price per ounce sold is a non-IFRS financial
measure which excludes from gold revenue:
- Unrealised mark-to-market gains and losses on provisional pricing
from copper and gold sales contracts; and
- Export duties.
Cash cost per ounce sold is a non-IFRS financial measure. Cash
costs include all costs absorbed into inventory, as well as royalties, and
production taxes, and exclude capitalised production stripping costs,
inventory purchase accounting adjustments, unrealised gains/losses from
non-hedge currency and commodity contracts, depreciation and amortisation and
corporate social responsibility charges. Cash cost is calculated net of
co-product revenue.
The table below provides a reconciliation between cost of sales and
total cash cost to calculate the cash cost per ounce sold.
(US$'000) Three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Total cost of sales 191,732 169,770 688,278 713,806
Deduct: depreciation and amortisation (35,228) (28,388) (128,124) (147,979)
Deduct: Co-product revenue (11,910) (11,181) (45,253) (43,012)
Total cash cost 144,594 130,201 514,901 522,815
Total ounces sold 194,243 168,167 703,680 643,597
Cash cost per ounce 744 774 732 812
Discontinued operations - - - 15
Attributable cash cost per ounce 744 774 732 827
Refer to note 5 to the condensed financial information for a
reconciliation to all-in sustaining cost per ounce sold.
The presentation of these statistics in this manner allows Acacia
to monitor and manage those factors that impact production costs on a monthly
basis. Cash cost per ounce sold is calculated by dividing the aggregate of
these costs by gold ounces sold. Cash costs and cash cost per ounce sold are
calculated on a consistent basis for the periods presented.
All-in sustaining cost (AISC) is a non-IFRS financial measure. The
measure is in accordance with the World Gold Council's guidance issued in June
2013. It is calculated by taking cash cost per ounce sold and adding corporate
administration costs, reclamation and remediation costs for operating mines,
corporate social responsibility expenses, mine exploration and study costs,
realised gains and/or losses on operating hedges, capitalised stripping and
underground development costs and sustaining capital expenditure. This is then
divided by the total ounces sold. A reconciliation between cash cost per ounce
sold and AISC for the key business segments is presented below:
(Unaudited) Three months ended 31 December 2014 Three months ended 31 December 2013
ACA Group ACA Group
ongoing ongoing
(US$/oz sold) Bulyanhulu North Mara Buzwagi operations Bulyanhulu North Mara Buzwagi operations
Cash cost per ounce sold 772 668 818 744 776 636 941 774
Corporate administration 49 39 39 53 69 42 47 49
Share based payments 7 - (8) 12 (1) (1) (1) 4
Rehabilitation 6 16 4 9 4 24 8 12
Mine exploration (2) 1 - - 2 8 1 4
CSR expenses 11 22 10 18 2 46 4 22
Capitalised development 225 62 50 111 189 224 215 209
Sustaining capital 157 104 77 141 77 96 85 89
Total continuing operations 1,225 912 990 1,088 1,118 1,075 1,300 1,163
Discontinued operations - 8
Total 1,088 1,171
(Unaudited) Year ended 31 December 2014 Year ended 31 December 2013
ACA Group ACA Group
ongoing North ongoing
(US$/oz sold) Bulyanhulu North Mara Buzwagi operations Bulyanhulu Mara Buzwagi operations
Cash cost per ounce sold 812 623 791 732 890 659 945 812
Corporate administration 49 37 38 46 72 39 52 53
Share based payments 3 1 1 12 - (1) (1) (3)
Rehabilitation 7 18 5 11 7 29 15 18
Mine exploration 2 2 1 1 3 12 2 6
CSR expenses 7 18 12 15 6 31 4 19
Capitalised development 279 149 147 188 233 251 321 266
Sustaining capital 107 99 60 100 133 207 168 175
Total continuing operations 1,266 947 1,055 1,105 1,344 1,227 1,506 1,346
Discontinued operations - 16
Total 1,105 1,362
AISC is intended to provide additional information on the total
sustaining cost for each ounce sold, taking into account expenditure incurred
in addition to direct mining costs, depreciation and selling costs.
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, by-product credits,
and production taxes, and exclude capitalised production stripping costs,
inventory purchase accounting adjustments, unrealised gains/losses from
non-hedge currency and commodity contracts, depreciation and amortisation and
corporate social responsibility charges. Cash cost is calculated net of
co-product revenue. Cash costs per tonne milled are calculated by dividing the
aggregate of these costs by total tonnes milled.
EBITDA is a non-IFRS financial measure. Acacia calculates EBITDA as
net profit or loss for the period excluding:
- Income tax expense;
- Finance expense;
- Finance income;
- Depreciation and amortisation; and
- Impairment charges of goodwill and other long-lived assets.
EBITDA is intended to provide additional information to investors
and analysts. It does not have any standardised meaning prescribed by IFRS and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. EBITDA excludes the impact of
cash costs of financing activities and taxes, and the effects of changes in
operating working capital balances, and therefore is not necessarily
indicative of operating profit or cash flow from operations as determined
under IFRS. Other companies may calculate EBITDA differently.
A reconciliation between net profit for the period and EBITDA is
presented below:
(US$'000) Three months ended 31 December Year ended 31 December
(Unaudited) 2014 2013 2014 2013
Net profit/ (loss) for the period 21,136 (100,342) 89,935 (798,433)
Plus income tax (credit)/ expense (13,906) (19,232) 25,977 (187,959)
Plus depreciation and amortization* 35,228 29,258 128,124 157,820
Plus: impairment charges/ write-offs - 133,320 - 1,061,011
Plus finance expense 3,194 2,476 10,081 9,668
Less finance income (392) (614) (1,401) (1,700)
EBITDA 45,260 44,866 252,716 240,407
*Depreciation and amortisation includes the depreciation component
of the cost of inventory sold.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted
for depreciation and amortisation and goodwill impairment charges.
Mining statistical information
The following describes certain line items used in the Acacia 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 of 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.
Risk Review
During the year we have made significant changes to the way that we run our
business, which has resulted in a number of changes to our principal risks
profile. Whilst our principal risks continue to fall within four broad
categories: strategic risks, financial risks, external risks and operational
risks, as a result of a range of cost control and revised operating and
planning initiatives implemented during the year, the following risks are no
longer viewed as principal risks to the management and operation of our
business: (i) costs and capital expenditure; (ii) utilities supply; (iii) land
acquisitions; and (iv) organisational restructuring. In addition to this and
again due to enhancements made to business practices throughout the year, we
have allocated a medium risk rating to the following risks, previously viewed
as high-level risks in 2013:
- Community relations: we have continued to enhance community
relations practices this year, having seen noticeable benefits through the
investments made by the Acacia Maendeleo Fund and other community relations
initiatives, in addition to the continued successful implementation of our
stakeholder engagement model and social management plans. In addition, we
continue to work on enhancements to our corporate social responsibility
strategy, particularly with a view to enhancing economic empowerment
initiatives, and other measures that enhance relationships with our local
stakeholders, such that we believe we have adequate initiatives in place to
manage and mitigate material risks to such relationships.
- Employee, contractor and industrial relations: we have continued
to strengthen employee relations and practices during the year, noticeably
through our implementation of our new accountable management system and
enhanced practices for industrial relations management. We also successfully
implemented core elements of organisational restructuring at Bulyanhulu
throughout the year and continue to advance our targets for workforce
nationalisation across the Group, such that risks relating to employees and
contractors are now viewed as having a medium impact to our business.
- Reserves and resources estimates: whilst it will never be
possible to give assurances or certainty as regards reserves and resources
estimates due to the varying nature and various factors which can impact such
estimates, as a result of the improvements we have introduced, and will
continue to implement as regards mine planning and cost controls this year, we
believe that we have reduced certain exposures in this context, such that
risks in this regard are now viewed as having a medium impact to our business.
- Taxation reviews: as noted in the financial review of the year,
we have made significant progress in the management and recoverability of
Acacia's indirect tax receivables, particularly in the context of VAT, such
that whilst any significant change to the taxation regime in Tanzania could
have a material adverse effect on our financial position, our 2014 risk rating
reflects the positive progress made to achieve resolutions to existing
disputes.
In conjunction with the re-assessment of certain risks, we have also looked at
the impact of emerging risks to our business, and believe it is appropriate to
add the following as new principal risks, given their importance to ongoing
operations:
- Safety risks relating to mining operations: despite the significant health,
safety and risk management systems that Acacia has in place for its
underground and surface mining operations, mining and in particular
underground mining is subject to a number of hazards and risks in the
workplace, such as fall of ground relating to underlying geotechnical risks,
potential fires and mobile equipment incidents, such that safety incidents in
the workplace may unfortunately occur and did occur in 2014.
- Implementation of enhanced operational systems: throughout 2014 we have made
a number of enhancements to mine planning and financial modelling practices as
part of continuing reviews of existing operational systems and models,
required to support increased productivity and ongoing reductions in operating
cost profiles. Given the ongoing nature of systems reviews and the importance
of this to the achievement of future business objectives, we believe it
appropriate to monitor the implementation of enhanced operational systems as a
principal risk going forward.
- Equipment effectiveness: previously we have reviewed risks relating to
equipment effectiveness in the context of availability of critical processes.
However, as part of ongoing reviews we have decided to separate this into a
standalone risk in order to chart equipment availability, utilisation and
productivity as required to meet increasing output levels.
- Occupational health and life threatening diseases: in prior years we have
viewed occupational health and disease risks as medium, given the range of
health and safety controls across our business. However, given the impact of
certain epidemics this year across the African region, notably the impact of
Ebola in West Africa, we have heightened monitoring of risks relating to
occupational health and life threatening diseases this year.
Further details as regards our Principal Risks and Uncertainties
will be provided as part of the 2014 Annual Report and Accounts.
Directors
The Directors serving on the Board during the year will be listed
in Acacia's annual report. A list of current Directors is maintained on
Acacia's website: www.acaciamining.com
Condensed Financial Information
Consolidated income statement
For the year For the year
ended ended
(Unaudited) 31 December 31 December
(in thousands of United States dollars, except per share amounts) Notes 2014 2013
CONTINUING OPERATIONS
Revenue 6 930,248 929,004
Cost of sales (688,278) (713,806)
Gross profit 241,970 215,198
Corporate administration (32,685) (33,970)
Share based payments (8,388) 1,813
Exploration and evaluation costs 7 (18,284) (16,927)
Corporate social responsibility expenses (10,787) (12,237)
Impairment charges - (1,044,310)
Other charges 8 (47,921) (30,424)
Profit/(loss) before net finance expense and taxation 123,905 (920,857)
Finance income 9 1,324 1,670
Finance expense 9 (10,043) (9,552)
Profit/(loss) before taxation 115,186 (928,739)
Tax (expense)/credit 10 (25,977) 187,959
Net profit/(loss) from continuing operations 89,209 (740,780)
DISCONTINUED OPERATIONS
Net profit/(loss) from discontinued operations 4 726 (57,653)
Net profit/(loss) for the year 89,935 (798,433)
Net profit/(loss) attributable to:
Owners of the parent (net earnings/(loss))
- Continuing operations 89,209 (740,780)
- Discontinued operations 1,193 (40,321)
Non-controlling interests
- Discontinued operations (467) (17,332)
Earnings/(loss) per share:
- Basic and dilutive earnings/(loss) per
share (cents) from continuing operations 11 21.8 (180.6)
- Basic and dilutive earnings/(loss) per
share (cents) from discontinued operations 11 0.3 (9.8)
The notes on pages 33 to 47 are an integral part of this financial
information.
Consolidated statement of comprehensive income
For the year For the year
ended ended
(Unaudited) 31 December 31 December
(in thousands of United States dollars) 2014 2013
Net profit/(loss) for the year 89,935 (798,433)
Other comprehensive (expense)/income:
Items that may be subsequently reclassified to profit or loss:
Changes in fair value of cash flow hedges (922) 1,570
Total comprehensive income/(loss) for the year 89,013 (796,863)
Attributed to:
- Owners of the parent 89,480 (779,531)
- Non-controlling interests (467) (17,332)
The notes on pages 33 to 47 are an integral part of this financial
information.
Consolidated balance sheet
As at As at
(Unaudited) 31 December 31 December
(in thousands of United States dollars) Notes 2014 2013
ASSETS
Non-current assets
Goodwill and intangible assets 211,190 211,190
Property, plant and equipment 12 1,425,315 1,280,671
Deferred tax assets 13 50,852 50,787
Non-current portion of inventory 90,006 72,689
Derivative financial instruments 14 1,806 3,253
Other assets 133,020 137,191
1,912,189 1,755,781
Current assets
Inventories 265,526 253,676
Trade and other receivables 15 34,989 24,210
Derivative financial instruments 14 1,040 1,366
Other current assets 15 75,822 113,945
Cash and cash equivalents 293,850 282,409
671,227 675,606
Assets of disposal group classified as held for sale - 596
Total assets 2,583,416 2,431,983
EQUITY AND LIABILITIES
Share capital and share premium 929,199 929,199
Other reserves 1,068,168 992,915
Total owners' equity 1,997,367 1,922,114
Non-controlling interests 4,781 5,248
Total equity 2,002,148 1,927,362
Non-current liabilities
Borrowings 16 127,800 142,000
Deferred tax liabilities 13 61,904 35,862
Derivative financial instruments 14 4,079 1,207
Provisions 17 155,601 132,237
Other non-current liabilities 17,365 10,101
366,749 321,407
Current liabilities
Trade and other payables 174,254 147,896
Borrowings 16 14,200 -
Derivative financial instruments 14 13,729 5,074
Provisions 17 4,617 1,028
Other current liabilities 7,719 12,456
214,519 166,454
Liabilities of disposal group classified as held for sale - 16,760
Total liabilities 581,268 504,621
Total equity and liabilities 2,583,416 2,431,983
The notes on pages 33 to 47 are an integral part of this financial
information.
Consolidated statement of changes in equity
Contributed Cash flow
Share Share surplus/Other hedging
(Unaudited) Notes capital premium reserve reserve
(in thousands of United States dollars)
Balance at 1 January 2013 62,097 867,102 1,368,713 363
Total comprehensive income/(loss) for the year - - - 1,570
Dividends to equity holders of the Company - - - -
Stock option grants - - - -
Balance at 31 December 2013 62,097 867,102 1,368,713 1,933
Total comprehensive (loss)/income for the year - - - (922)
Dividends to equity holders of the Company - - - -
Stock option grants - - - -
Balance at 31 December 2014 62,097 867,102 1,368,713 1,011
Retained
Stock earnings/ Total Total non-
option (Accumulated owners' controlling Total
(Unaudited) Notes reserve losses) equity interests equity
(in thousands of United States dollars)
Balance at 1 January 2013 3,502 453,933 2,755,710 22,580 2,778,290
Total comprehensive income/(loss) for the year - (781,101) (779,531) (17,332) (796,863)
Dividends to equity holders of the Company - (54,541) (54,541) - (54,541)
Stock option grants 476 - 476 - 476
Balance at 31 December 2013 3,978 (381,709) 1,922,114 5,248 1,927,362
Total comprehensive (loss)/income for the year - 90,402 89,480 (467) 89,013
Dividends to equity holders of the Company - (13,943) (13,943) - (13,943)
Stock option grants (284) - (284) - (284)
Balance at 31 December 2014 3,694 (305,250) 1,997,367 4,781 2,002,148
The notes on pages 33 to 47 are an integral part of this financial
information.
Consolidated statement of cash flows
For the For the year
year ended ended
(Unaudited) 31 December 31 December
(in thousands of United States dollars) 2014 2013
Cash flows from operating activities
Net profit/(loss) for the year 89,935 (798,433)
Adjustments for:
Tax expense/(credit) 25,977 (187,959)
Depreciation and amortisation 124,113 141,159
Finance items 8,680 7,968
Impairment charges - 1,061,011
Profit on disposal of property, plant and equipment (4,332) (175)
Working capital adjustments 20,150 (41,165)
Other non-cash items 28,988 8,181
Cash generated from operations before interest and tax 293,511 190,587
Finance income 1,401 1,700
Finance expenses (5,384) (5,172)
Income tax paid - -
Net cash generated by operating activities 289,528 187,115
Cash flows from investing activities
Purchase of property, plant and equipment (246,682) (373,101)
Investments in other assets 1,388 (8,289)
Cash flow related to the sale of Tulawaka (11,633) -
Acquisition of subsidiary, net of cash acquired - (588)
Other investing activities (65) (4,872)
Net cash used in investing activities (256,992) (386,850)
Cash flows from financing activities
Loans received - 142,000
Dividends paid (13,943) (54,541)
Finance lease instalments (5,073) (5,137)
Net cash (used in)/generated by financing activities (19,016) 82,322
Net increase/(decrease) in cash and cash equivalents 13,520 (117,413)
Net foreign exchange difference (2,079) (1,526)
Cash and cash equivalents at 1 January 282,409 401,348
Cash and cash equivalents at 31 December 293,850 282,409
The notes on pages 34 to 47 are an integral part of this financial
information.
Notes to the condensed financial information
1. General Information
Acacia Mining plc, formerly African Barrick Gold plc (the
"Company", "Acacia" or collectively with its subsidiaries the "Group") was
incorporated on 12 January 2010 and re-registered as a public limited company
on 12 March 2010 under the Companies Act 2006. It is registered in England and
Wales with registered number 7123187.
On 24 March 2010 the Company's shares were admitted to the Official
List of the United Kingdom Listing Authority ("UKLA") and to trading on the
Main Market of the London Stock Exchange, hereafter referred to as the Initial
Public Offering ("IPO"). The address of its registered office is No.1
Cavendish Place, London, W1G 0QF.
Barrick Gold Corporation ("Barrick") currently owns approximately
63.9% of the shares of the Company and is the ultimate parent and controlling
party of the Group. The financial statements of Barrick can be obtained from
www.barrick.com.
The condensed consolidated financial information for the year ended
31 December 2014 was approved for issue by the Board of Directors of the
Company on 13 February 2015. The condensed consolidated financial information
does not comprise statutory accounts within the meaning of section 434 of the
Companies Act 2006. The condensed consolidated financial information is
unaudited.
The Group's primary business is the mining, processing and sale of
gold. The Group has three operating mines located in Tanzania. The Group also
has a portfolio of exploration projects located across Africa.
2. Basis of Preparation of the condensed financial information
The financial information set out above does not constitute the
Group's statutory accounts for the year ended 31 December 2014, but is derived
from the Group's full financial accounts, which are in the process of being
audited. The Group's full financial accounts will be prepared under
International Financial Reporting Standards as adopted by the European Union.
The financial statements are prepared on a going concern basis.
The condensed consolidated financial information has been prepared
under the historical cost convention basis, as modified by the revaluation of
financial assets and financial liabilities (including derivative instruments)
at fair value through profit and loss. The financial statements are presented
in US dollars (US$) and all monetary results are rounded to the nearest
thousand dollars (US) except when otherwise indicated.
Where a change in the presentational format between the prior year
and current year condensed consolidated financial information has been made
during the period, comparative figures have been restated accordingly. No
presentational changes were made in the current year.
3. Accounting Policies
Accounting policies have remained consistent with the prior year except for
the adoption of new standards.
a) New and amended standards adopted by the Group
The following new standards and amendments to standards are applicable and
were adopted by the Group for the first time for the financial year beginning
1 January 2014:
- Amendment to IAS 32, `Financial instruments: Presentation' on offsetting
financial assets and financial liabilities. This amendment clarifies that the
right of set-off must not be contingent on a future event. It must also be
legally enforceable for all counterparties in the normal course of business,
as well as in the event of default, insolvency or bankruptcy. The amendment
also considers settlement mechanisms. The amendment did not have a significant
effect on the group financial statements.
- Amendments to IAS 36, `Impairment of assets', on the recoverable
amount disclosures for non-financial assets. This amendment removed certain
disclosures of the recoverable amount of CGUs which had been included in IAS
36 by the issue of IFRS 13.
- Amendment to IAS 39, `Financial instruments: Recognition and
measurement' on the novation of derivatives and the continuation of hedge
accounting. This amendment considers legislative changes to `over-the-counter'
derivatives and the establishment of central counterparties. Under IAS 39
novation of derivatives to central counterparties would result in
discontinuance of hedge accounting. The amendment provides relief from
discontinuing hedge accounting when novation of a hedging instrument meets
specified criteria. The group has applied the amendment and there has been no
significant impact on the group financial statements as a result.
- IFRIC 21, `Levies', sets out the accounting for an obligation to
pay a levy if that liability is within the scope of IAS 37 `Provisions'. The
interpretation addresses what the obligating event is that gives rise to pay a
levy and when a liability should be recognised. The Group is not currently
subjected to significant levies so the impact on the Group is not material.
- IFRS 10, `Consolidated financial statements' builds on existing
principles by identifying the concept of control as the determining factor in
whether an entity should be included within the consolidated financial
statements of the parent company. The standard provides additional guidance to
assist in the determination of control where this is difficult to assess. The
amendment did not have a significant effect on the assessment of control.
- IFRS 11, `Joint arrangements' focuses on rights and obligations
of the parties to the arrangement rather than its legal form. Proportional
consolidation of joint arrangements is no longer permitted. The amendment did
not have a significant effect on the group financial statements.
- IFRS 12, `Disclosures of interests in other entities' includes
the disclosure requirements for all forms of interests in other entities
including joint arrangements, associates, structured entities and other
off-balance sheet vehicles. The amendment did not have a significant effect on
the group financial statements.
b) New and amended standards, and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are
effective for annual periods beginning after 1 January 2014, and have not been
applied in preparing these condensed consolidated financial statements.
- IFRS 9, `Financial instruments', addresses the classification, measurement
and recognition of financial assets and financial liabilities. The complete
version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39
that relates to the classification and measurement of financial instruments.
IFRS 9 retains but simplifies the mixed measurement model and establishes
three primary measurement categories for financial assets: amortised cost,
fair value through OCI and fair value through P&L. The basis of classification
depends on the entity's business model and the contractual cash flow
characteristics of the financial asset. Investments in equity instruments are
required to be measured at fair value through profit or loss with the
irrevocable option at inception to present changes in fair value in OCI not
recycling. There is now a new expected credit losses model that replaces the
incurred loss impairment model used in IAS 39. For financial liabilities there
were no changes to classification and measurement except for the recognition
of changes in own credit risk in other comprehensive income, for liabilities
designated at fair value through profit or loss. IFRS 9 relaxes the
requirements for hedge effectiveness by replacing the bright line hedge
effectiveness tests. It requires an economic relationship between the hedged
item and hedging instrument and for the `hedged ratio' to be the same as the
one management actually use for risk management purposes. Contemporaneous
documentation is still required but is different to that currently prepared
under IAS 39. The standard is effective for accounting periods beginning on or
after 1 January 2018. Early adoption is permitted subject to EU endorsement.
The group is yet to assess IFRS 9's full impact.
- IFRS 15, `Revenue from contracts with customers' deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature, amount, timing
and uncertainty of revenue and cash flows arising from an entity's contracts
with customers. Revenue is recognised when a customer obtains control of a
good or service and thus has the ability to direct the use and obtain the
benefits from the good or service. The standard replaces IAS 18 `Revenue' and
IAS 11 `Construction contracts' and related interpretations. The standard is
effective for annual periods beginning on or after 1 January 2017 and earlier
application is permitted. The standard is not expected to have a significant
impact on the Group.
4. Discontinued Operations and disposal group assets and liabilities held for
sale
On 15 November 2013, Acacia announced that an agreement was reached
with STAMICO, the Tanzanian State Mining Corporation, whereby STAMICO would
acquire the Tulawaka Gold Mine ("Tulawaka") and certain exploration licences
surrounding Tulawaka for consideration of US$4.5 million and the grant of a 2%
net smelter royalty on future production in excess of 500,000 ounces, capped
at US$500,000.
On 4 February 2014, Acacia announced the completion of the sale.
STAMICO has taken ownership and management of the rehabilitation fund
established as part of the closure plan for the mine, in return for the
assumption of all remaining past and future closure and rehabilitation
liabilities for Tulawaka, and has indemnified the other parties to the
agreement in relation to these liabilities. The transfer was completed with a
net cash payment of US$11.6 million by Acacia to STAMICO for the balance of
the rehabilitation fund, less the transaction consideration. This resulted in
a gain of US$4.1 million.
The financial results of Tulawaka have been presented as discontinued
operations in the consolidated financial statements. The comparative results
in the consolidated income statement have been presented as if Tulawaka had
been discontinued from the start of the comparative period.
Below is a summary of the results of Tulawaka for the year ended 31 December:
(in thousands of United States dollars) 2014 2013
Results of discontinued operations
Revenue - 13,514
Cost of sales - (30,368)
Gross loss - (16,854)
Corporate administration - (1,311)
Corporate social responsibility expenses1 (118) (3,259)
Impairment charges - (16,701)
Other charges2 805 (19,442)
Loss before net finance expense and taxation 687 (57,567)
Finance income 77 30
Finance expense (38) (116)
Loss before taxation 726 (57,653)
Tax credit - -
Net loss for the year 726 (57,653)
1 Corporate social responsibility expenses relate to projects supported from
the Acacia Maendeleo Fund.
2 Included in other charges are non-operational costs incurred since the
cessation of operations of US$1.9 million.
Below is a summary of the cash flows from discontinued operations for the year
ended 31 December:
(in thousands of United States dollars) 2014 2013
Operating cash flows 6,300 (31,811)
Investing cash flows (11,612) (8,702)
Financing cash flows - -
Total cash flows (5,312) (40,513)
Below is a summary of Tulawaka's assets and liabilities at 31 December
classified as disposal group held for sale:
(in thousands of United States dollars) 2014 2013
Property, plant and equipment - 239
Inventories - 357
Disposal group assets held for sale - 596
Provisions - 16,760
Disposal group liabilities held for sale - 16,760
Net assets and liabilities of disposal group held for sale - (16,164)
5. Segment Reporting
The Group has only one primary product produced in a single
geographic location, being gold produced in Tanzania. In addition the Group
produces copper and silver as a co-product. Reportable operating segments are
based on the internal reports provided to the Chief Operating Decision Maker
("CODM") to evaluate segment performance, decide how to allocate resources and
make other operating decisions. After applying the aggregation criteria and
quantitative thresholds contained in IFRS 8, the Group's reportable operating
segments were determined to be: North Mara gold mine; Bulyanhulu gold mine;
Buzwagi gold mine; a separate Corporate and Exploration segment, which
primarily consists of costs related to other charges and corporate social
responsibility expenses, as well as discontinued operations (Tulawaka gold
mine).
Segment results and carrying values include items directly
attributable to the segment as well as those that can be allocated on a
reasonable basis. Segment carrying values are disclosed and calculated as
shareholders equity after adding back debt and intercompany liabilities, and
subtracting cash and intercompany assets. Capital expenditures comprise of
additions to property, plant and equipment. The Group has also included
segment cash costs and all-in sustaining cost per ounce sold.
Segment information for the reportable operating segments of the
Group for the periods ended 31 December 2014 and 31 December 2013 is set out
below.
For the year ended 31 December 2014
North Continuing Discontinued
(in thousands of United States dollars) Mara Bulyanhulu Buzwagi Other operations operations6 Total
Gold revenue 346,790 269,390 268,815 - 884,995 - 884,995
Co-product revenue 546 17,287 27,420 - 45,253 - 45,253
Total segment revenue 347,336 286,677 296,235 - 930,248 - 930,248
Segment cash operating cost1 (171,535) (192,363) (196,256) - (560,154) - (560,154)
Corporate administration and exploration (10,967) (11,570) (8,533) (28,287) (59,357) - (59,357)
Other charges and corporate social
responsibility expenses (8,519) (13,811) (11,188) (25,190) (58,708) 687 (58,021)
EBITDA2 156,315 68,933 80,258 (53,477) 252,029 687 252,716
Depreciation and amortisation7 (74,893) (38,444) (11,763) (3,024) (128,124) - (128,124)
EBIT2 81,422 30,489 68,495 (56,501) 123,905 687 124,592
Finance income 257 164 403 500 1,324 77 1,401
Finance expense (2,389) (2,721) (2,398) (2,535) (10,043) (38) (10,081)
Profit before taxation 75,640 27,932 66,501 (58,537) 115,186 726 115,912
Tax expense (23,043) (7,345) (20,175) 1,408 (25,977) - (25,977)
Net profit for the year 52,597 20,588 46,326 (57,128) 89,209 726 89,935
Capital expenditure:
Sustaining 18,049 23,388 12,817 6,004 60,258 - 60,258
Expansionary 13,126 48,010 - - 61,136 - 61,136
Capitalised development 40,900 60,151 31,357 132,408 - 132,408
72,075 131,549 44,174 6,004 253,802 - 253,802
Non-cash capital expenditure adjustments
Reclamation asset addition/(reduction) 16,003 6,141 (1,131) - 21,013 - 21,013
Other non-cash capital expenditure - - - (5,876) (5,876) - (5,876)
Total capital expenditure8 88,078 137,690 43,043 128 268,939 - 268,939
Segmental cash operating cost 171,535 192,363 196,256 - 560,154 - 560,154
Deduct: co-product revenue (546) (17,287) (27,420) - (45,253) - (45,253)
Total cash costs 170,989 175,076 168,836 - 514,901 - 514,901
Sold ounces3 274,540 215,740 213,399 - 703,680 - 703,680
Attributable cash cost per ounce sold2 623 812 791 732 732
Total cash costs2 623 812 791 732 732
Corporate administration charges 38 52 39 58 58
Rehabilitation - accretion and depreciation 18 7 5 11 11
Mine site exploration costs 2 2 1 1 1
Corporate social responsibility expenses 18 7 12 15 15
Capitalised stripping/ UG development 149 279 147 188 188
Sustaining capital expenditure 99 107 60 100 100
All-in sustaining cost per ounce sold2 947 1,266 1,055 1,105 1,105
Segment carrying value5 326,760 1,212,004 261,993 70,547 1,871,304 - 1,871,304
For the year ended 31 December 2013
North Continuing Discontinued
(in thousands of United States dollars) Mara Bulyanhulu Buzwagi Other operations operations6 Total
Gold revenue 364,574 262,539 258,879 - 885,992 13,483 899,475
Co-product revenue 819 16,882 25,311 - 43,012 31 43,043
Total segment revenue 365,393 279,421 284,190 - 929,004 13,514 942,518
Segment cash operating cost1 (172,894) (190,647) (202,286) - (565,827) (20,527) (586,354)
Corporate administration and exploration (13,026) (14,661) (20,976) (421) (49,084) (1,311) (50,395)
Other charges and corporate social
responsibility expenses (11,961) (5,827) (4,730) (20,143) (42,661) (22,701) (65,362)
EBITDA2 167,512 68,286 56,198 (20,564) 271,432 (31,025) 240,407
Impairment charges (307,259) - (690,478) (46,573) (1,044,310) (16,701) (1,061,011)
Depreciation and amortisation7 (68,565) (35,867) (39,906) (3,641) (147,979) (9,841) (157,820)
EBIT2 (208,312) 32,419 (674,186) (70,778) (920,857) (57,567) (978,424)
Finance income 327 662 406 275 1,670 30 1,700
Finance expense (2,501) (1,482) (2,446) (3,123) (9,552) (116) (9,668)
Loss before taxation (210,486) 31,599 (676,226) (73,626) (928,739) (57,653) (986,392)
Tax credit 44,283 (13,977) 146,990 10,663 187,959 - 187,959
Net loss for the year (166,203) 17,622 (529,236) (62,963) (740,780) (57,653) (798,433)
Capital expenditure:
Sustaining 38,386 25,193 31,589 690 95,858 583 96,441
Expansionary 949 114,912 - 1,608 117,469 - 117,469
Capitalised development 65,594 45,428 60,136 171,158 - 171,158
104,929 185,533 91,725 2,298 384,485 583 385,068
Non-cash capital expenditure adjustments
Reclamation asset addition/(reduction) (11,271) (10,044) (9,230) - (30,545) (195) (30,740)
Total capital expenditure 93,658 175,489 82,495 2,298 353,940 388 354,328
Segmental cash operating cost 172,894 190,647 202,286 - 565,827 20,527 586,354
Deduct: co-product revenue (819) (16,882) (25,311) - (43,012) (31) (43,043)
Total cash costs 172,075 173,765 176,975 - 522,815 20,496 543,311
Sold ounces3 260,945 195,304 187,348 - 643,597 8,778 652,375
Cash cost per ounce sold2 659 890 945 - 812 2,335 833
Attributable to outside interests4 (6)
Total attributable cash cost per ounce
sold2 827
Cash costs per ounce sold2 659 890 945 812 2,335 833
Corporate administration charges 38 72 51 50 149 51
Rehabilitation - accretion and depreciation 29 7 15 18 86 19
Mine site exploration costs 12 3 2 6 6 6
Corporate social responsibility expenses 31 6 4 19 371 24
Capitalised stripping/ UG development 251 233 321 266 - 262
Sustaining capital expenditure 207 133 168 175 66 173
Attributable to outside interests4 (6)
All-in sustaining cost per ounce sold2 1,227 1,344 1,506 1,346 3,013 1,362
Segment carrying value5 367,326 1,116,142 253,344 81,005 1,817,817 10,489 1,828,306
1 The CODM reviews cash operating costs for the three operating
mine sites separately from corporate administration costs and exploration
costs. Consequently, the Group has reported these costs in this manner.
2 These are non-IFRS financial performance measures with no
standard meaning under IFRS. Refer to `Non IFRS measures' on page 25 for
definitions.
3 Reflects 100% of ounces sold.
4 Reflects the adjustment for non-controlling interest at Tulawaka.
5 Segment carrying values are calculated as shareholders equity
after adding back debt and intercompany liabilities, and subtracting cash and
intercompany assets and include outside shareholders' interests.
6 Represents Tulawaka, which has been discontinued.
7 Depreciation and amortisation includes the depreciation component
of the cost of inventory sold.
8 Capital expenditure for the segment note and all-in sustaining
cost calculations excludes foreign exchange movements on property, plant and
equipment balances which are included in note 12 Property, plant and
equipment.
6. Revenue
For the year For the year
ended 31 ended 31
December December
(in thousands of United States dollars) 2014 2013
Gold doré sales 602,173 659,760
Gold concentrate sales¹ 282,822 226,231
Copper concentrate sales¹ 40,507 37,539
Silver sales 4,746 5,474
Total 930,248 929,004
1 Concentrate sales includes negative provisional price adjustments to the
accounts receivable balance due to changes in market gold, silver and copper
prices prior to final settlement as follows: US$5.4 million for the year ended
31 December 2014 (US$12.2 million for the year ended 31 December 2013).
For the year For the year
ended 31 ended 31
(in thousands of United States dollars) December December
Revenue by Location of Customer2 2014 2013
Europe
Switzerland - 257,914
Germany 104,981 73,126
Asia
India 603,807 403,956
China 134,844 117,099
Japan 86,616 76,909
Total revenue 930,248 929,004
2 Revenue by location of customer is determined based on the
country to which the gold is delivered.
Included in revenues for the year ended 31 December 2014 are sales
to seven major customers. Revenues of approximately US$625 million (2013:
US$681 million) arose from sales to four of the Group's largest customers.
7. Exploration and Evaluation costs
The following represents a summary of exploration and evaluation expenditures
incurred at each mine site and significant exploration targets (if
applicable).
For the year For the year
ended 31 ended 31
December December
(in thousands of United States dollars) 2014 2013
Expensed during the year:
North Mara 478 3,099
Buzwagi 148 366
Bulyanhulu 7,595 656
Kenya 5,554 4,407
Other1 4,509 8,399
Total expensed 18,284 16,927
Capitalised during the year:
North Mara 1,957 410
Bulyanhulu 204 1,945
Nyanzaga - 1,608
Total capitalised 2,161 3,963
Total 20,445 20,890
1 - Included in "other" are the exploration activities conducted through
Acacia Exploration Africa Limited and in West Africa for the South Houndé
Project. All primary greenfield exploration and evaluation activities are
conducted in these companies.
8. Other Charges
For the year For the year
ended ended
31 December 31 December
(in thousands of United States dollars) 2014 2013
Other expenses
Operational Review costs (including restructuring cost) 13,689 13,305
Discounting of indirect tax receivables - 1,375
Unrealised non-hedge derivative losses 13,621 7,203
Foreign exchange losses 13,516 -
Bad debt expense 326 1,369
Disallowed indirect taxes 710 1,463
Legal costs 6,710 3,138
CNG related costs (residual) - 3,246
Government levies and charges 1,626 2,387
Project development costs 1,196 -
Loss on disposal of property, plant and equipment 89 -
Other 86 3,617
Total 51,569 37,103
Other income
Discounting of indirect tax receivables (3,648) -
Profit on disposal of property, plant and equipment - (99)
Foreign exchange gains - (3,622)
Insurance theft claim - (2,958)
Total (3,648) (6,679)
Total other charges 47,921 30,424
9. Finance Income and Expenses
a) Finance income
For the year For the year
ended ended
31 December 31 December
(in thousands of United States dollars) 2014 2013
Interest on time deposits 868 937
Other 456 733
Total 1,324 1,670
b) Finance expense
For the year For the year
ended ended
31 December 31 December
(in thousands of United States dollars) 2014 2013
Unwinding of discount1 4,697 4,468
Revolving credit facility charges2 2,447 3,050
Interest on CIL facility 3,925 2,413
Interest on finance leases 439 658
Bank charges 606 756
Other 862 620
12,976 11,965
Capitalised during the year (2,933) (2,413)
Total 10,043 9,552
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.
10. Tax Expense/(Credit)
For the year For the year
ended ended
31 December 31 December
(in thousands of United States dollars) 2014 2013
Current tax:
Current tax on profits for the year - -
Adjustments in respect of prior years - 40
Total current tax - 40
Deferred tax:
Origination and reversal of temporary differences 25,977 (187,999)
Total deferred tax 25,977 (187,999)
Income tax expense/(credit) 25,977 (187,959)
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 For the
year year
ended 31 ended 31
December December
(in thousands of United States dollars) 2014 2013
Profit/(loss) before tax 115,186 (928,739)
Tax calculated at domestic tax rates applicable to profits in the
respective countries 41,544 (291,546)
Tax effects of:
Expenses not deductible for tax purposes 438 13,111
Utilisation of previously unrecognised tax losses (21,140) -
Tax losses for which no deferred income tax asset was recognised 8,039 84,904
Prior year adjustments (2,904) 5,572
Tax charge/(credit) 25,977 (187,959)
Tax periods remain open to review by the Tanzanian Revenue Authority (TRA) in
respect of income taxes for five years following the date of the filing of the
corporate tax return, during which time the authorities have the right to
raise additional tax assessments including penalties and interest. Under
certain circumstances the reviews may cover longer periods. Because a number
of tax periods remain open to review by tax authorities, there is a risk that
transactions that have not been challenged in the past by the authorities may
be challenged by them in the future, and this may result in the raising of
additional tax assessments plus penalties and interest.
11. Earnings/(loss) Per Share (EPS)
Basic EPS is calculated by dividing the net profit for the year
attributable to owners of the Company by the weighted average number of
Ordinary Shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted
average number of Ordinary Shares outstanding to assume conversion of all
dilutive potential Ordinary Shares. The Company has dilutive potential
Ordinary Shares in the form of stock options. The weighted average number of
shares is adjusted for the number of shares granted assuming the exercise of
stock options.
At 31 December 2014 and 31 December 2013, earnings per share have been
calculated as follows:
For the year For the year
ended ended
31 December 31 December
(in thousands of United States dollars except per share amounts) 2014 2013
Earnings/(loss)
Net profit/(loss) from continuing operations attributable to owners of the
parent 89,209 (740,780)
Net profit/(loss) from discontinued operations attributable to owners of the
parent 1,193 (40,321)
Weighted average number of Ordinary Shares in issue 410,085,499 410,085,499
Adjusted for dilutive effect of stock options 218,126 -
Weighted average number of Ordinary Shares for diluted earnings per share 410,303,625 410,085,499
Earnings/(loss) per share
Basic and dilutive earnings/(loss) per share from continuing operations
(cents) 21.8 (180.6)
Basic and dilutive earnings/(loss) per share from discontinued operations
(cents) 0.3 (9.8)
Group basic and dilutive earnings/ (loss) per share 22.1 (190.4)
12. Property, Plant and Equipment
Mineral properties
For the year ended 31 December 2014 and mine Assets under
(in thousands of United States dollars) Plant and equipment development costs construction¹ Total
At 1 January 2014, net of accumulated depreciation 392,644 651,763 236,264 1,280,671
Additions - - 268,939 268,939
Disposals/write-downs (182) - - (182)
Depreciation (55,411) (68,702) - (124,113)
Transfers between categories 233,518 127,751 (361,269) -
At 31 December 2014 570,569 710,812 143,934 1,425,315
At 1 January 2014
Cost 1,518,500 1,383,693 236,264 3,138,457
Accumulated depreciation (1,125,856) (731,930) - (1,857,786)
Net carrying amount 392,644 651,763 236,264 1,280,671
At 31 December 2014
Cost 1,750,743 1,511,444 143,934 3,406,121
Accumulated depreciation and impairment (1,180,174) (800,632) - (1,980,806)
Net carrying amount 570,569 710,812 143,934 1,425,315
Mineral properties
For the year ended 31 December 2013 and mine Assets under
(in thousands of United States dollars) Plant and equipment development costs construction¹ Total
At 1 January 2013, net of accumulated
depreciation 945,118 819,063 210,859 1,975,040
Additions - - 354,328 354,328
Disposals/write-downs (477) - - (477)
Impairments2,3 (607,368) (299,454) - (906,822)
Depreciation (84,350) (56,809) - (141,159)
Transfers between categories3 139,721 189,202 (328,923) -
Reclassification to disposal group assets held
for sale - (239) - (239)
At 31 December 20133 392,644 651,763 236,264 1,280,671
At 1 January 2013
Cost 1,475,374 1,250,088 210,859 2,936,321
Accumulated depreciation (530,256) (431,025) - (961,281)
Net carrying amount 945,118 819,063 210,859 1,975,040
At 31 December 2013
Cost3 1,518,500 1,383,693 236,264 3,138,457
Accumulated depreciation and impairment3 (1,125,856) (731,930) - (1,857,786)
Net carrying amount 392,644 651,763 236,264 1,280,671
1 Assets under construction represents (a) sustaining capital
expenditures incurred constructing property, plant and equipment related to
operating mines and advance deposits made towards the purchase of property,
plant and equipment; and (b) expansionary expenditure allocated to a project
on a business combination or asset acquisition, and the subsequent costs
incurred to develop the mine. Once these assets are ready for their intended
use, the balance is transferred to plant and equipment and/or mineral
properties and mine development costs.
2 The impairment in 2013 relates to long lived assets at Buzwagi, North Mara
and Tulawaka.
3 2013 carrying values have been restated to correct the allocation of
movements between asset categories. This has not resulted in a change in the
total carrying value.
Leases
Property, plant and equipment includes assets relating to the design and
construction costs of power transmission lines and related infrastructure. At
completion, ownership was transferred to TANESCO in exchange for amortised
repayment in the form of reduced electricity supply charges. No future lease
payment obligations are payable under these finance leases.
Property, plant and equipment also includes emergency back-up and spinning
power generators leased at the Buzwagi mine under a three-year lease
agreement, with an option to purchase the equipment at the end of the lease
term. These leases have been classified as finance leases.
Property, plant and equipment also includes five drill rigs purchased under
short-term finance leases.
The following amounts were included in property, plant and equipment where the
Group is a lessee under a finance lease:
As at As at
31 December 31 December
(in thousands of United States dollars) 2014 2013
Cost - capitalised finance leases 70,764 70,764
Accumulated depreciation and impairment (53,246) (50,091)
Net carrying amount 17,518 20,673
13. Deferred Tax Assets and Liabilities
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following
items:
As at As at
31 December 31 December
(in thousands of United States dollars) 2014 2013
Tax losses 397,153 418,263
Total 397,153 418,263
The above tax losses, which translate into deferred tax assets of
approximately US$111 million (2013: US$126 million), have not been recognised
in respect of these items due to uncertainties regarding availability of tax
losses, or there being uncertainty regarding future taxable income against
which these assets can be utilised.
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Balance sheet classifications
Balance sheet classification Assets Liabilities Net
(in thousands of United 2014 2013 2014 2013 2014 2013
States dollars)
Property, plant and
equipment - - 357,071 297,421 357,071 297,421
Provisions (10,663) (11,756) - - (10,663) (11,756)
Interest deferrals (23,129) (22,960) 341 286 (22,788) (22,674)
Tusker acquisition - - 6,668 7,340 6,668 7,340
Kenya acquisition - - 2,880 4,565 2,880 4,565
Tax loss carry-forwards (322,116) (289,821) - - (322,116) (289,821)
Net deferred tax
(assets)/liabilities (355,908) (324,537) 366,960 309,612 11,052 (14,925)
Legal entities
Legal entities Assets Liabilities Net
(in thousands of United States 2014 2013 2014 2013 2014 2013
dollars)
North Mara Gold Mine Ltd - - 30,897 10,098 30,897 10,098
Bulyanhulu Gold Mine Ltd - - 21,323 13,594 21,323 13,594
Pangea Minerals Ltd (48,066) (48,066) - - (48,066) (48,066)
Other (2,786) (2,721) 9,684 12,170 6,898 9,449
Net deferred tax
(assets)/liabilities (50,852) (50,787) 61,904 35,862 11,052 (14,925)
Uncertainties regarding availability of tax losses in respect of enquiries
raised and additional tax assessments issued by the TRA, have been measured
using the single best estimate of likely outcome approach resulting in the
recognition of substantially all the related deferred tax assets and
liabilities. Alternative acceptable measurement policies (e.g. on a weighted
average expected outcome basis) could result in a change to deferred tax
assets and liabilities being recognised, and the deferred tax charge in the
income statement.
No deferred tax has been recognised in respect of temporary differences
associated with investments in subsidiaries where the Group is in a position
to control the timing of the reversal of the temporary differences, and it is
probable that such differences will not reverse in the foreseeable future. The
aggregate amount of temporary differences associated with such investments in
subsidiaries is represented by the contribution of those investments to the
Group's retained earnings and amounted to US$325 million (2013: US$327
million).
14. Derivative financial instruments
The table below analyses financial instruments carried at fair
value, by valuation method. The Group has derivative financial instruments in
the form of economic and cash flow hedging contracts which are all defined as
level two instruments as they are valued using inputs other than quoted prices
that are observable for the assets or liabilities. The following tables
present the group's assets and liabilities that are measured at fair value at
31 December 2014 and 31 December 2013.
Assets Liabilities
(in thousands of United States dollars) Current Non-current Current Non-current Net fair value
For the year ended 31 December 2014
Interest contracts: Designated as cash flow hedges - 1,806 1,054 - 752
Currency contracts: Not designated as hedges - - 819 - (819)
Commodity contracts: Not designated as hedges 1,040 - 11,856 4,079 (14,895)
Total 1,040 1,806 13,729 4,079 (14,962)
Assets Liabilities
(in thousands of United States dollars) Current Non-current Current Non-current Net fair value
For the year ended 31 December 2013
Currency contracts: Designated as cash flow hedges - - - 353 (353)
Interest contracts: Designated as cash flow hedges - 3,191 1,168 449 1,574
Currency contracts: Not designated as hedges 158 3 3,666 387 (3,892)
Commodity contracts: Not designated as hedges 1,208 59 240 18 1,009
Total 1,366 3,253 5,074 1,207 (1,662)
15. Trade Receivables and other Current Assets
As at As at
31 December 31 December
(in thousands of United States dollars) 2014 2013
Trade and other receivables:
Amounts due from doré and concentrate sales 26,202 16,204
Other receivables¹ 10,270 10,102
Due from related parties 38 37
Less: Provision for doubtful debt on other receivables (1,521) (2,133)
Total trade receivables 34,989 24,210
1 Other receivables relates to employee and supplier backcharge-related
receivables and refundable deposits.
Trade receivables other than concentrate receivables are non-interest bearing
and are generally on 30-90 day terms. Concentrate receivables are generally on
60-120 day terms depending on the terms per contract. Trade receivables are
amounts due from customers in the ordinary course of business. If collection
is expected in one year or less, they are classified as current assets; if
not, they are presented as non-current assets. The carrying value of trade
receivables recorded in the financial statements represents the maximum
exposure to credit risk. The Group does not hold any collateral as security.
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less any
provisions for impairment. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will not be able
to collect all amounts due according to the original terms of the receivables.
As at As at
31 December 31 December
(in thousands of United States dollars) 2014 2013
Indirect taxes receivable2 108,143 159,824
Other receivables and advance payments³ 29,926 18,912
138,069 178,736
Less: Indirect taxes receivable classified as non-current (62,247) (64,791)
Other current assets 75,822 113,945
2 To reflect the time value of money the long-term portion of this receivable
has been discounted at a rate of 5% (2013: 5%).
3 Other receivables and advance payments relate to prepayments for
insurance and income taxes offset against outstanding refunds for VAT and fuel
levies and current amounts receivable from the NSSF of US$5.5 million (2013:
US$7.0 million).
16. Borrowings
During 2013, a US$142 million facility was put in place to fund the
bulk of the costs of the construction of one of Acacia's key growth projects,
the Bulyanhulu CIL Expansion project ("Project"). The Facility is
collateralised by the Project, has a term of seven years with a spread over
Libor of 250 basis points. The interest rate has been fixed at 3.6% through
the use of an interest rate swap. The 7 year Facility is repayable in equal
bi-annual instalments over the term of the Facility, after a two year
repayments holiday period. The first principal payment is due in H2 2015. The
full facility of US$142 million was drawn at the end of 2013. Interest accrued
to the value of US$0.7 million was included in accounts payable at year end.
Interest incurred on the borrowings as well as hedging losses on the interest
rate swap were capitalised as an asset until the CIL plant was commissioned at
the beginning of Q4 and have since been expensed. An amount of US$1.0 million
has been expensed.
17. Provisions
Rehabilitation¹ Other² Total
(in thousands of United States
dollars) 2014 2013 2014 2013 2014 2013
At 1 January 131,701 180,548 1,564 1,040 133,265 181,588
Change in estimate 21,013 (30,740) (86) 524 20,927 (30,216)
Utilised during the year (399) (5,843) (531) - (930) (5,843)
Unwinding of discount 4,697 4,496 - - 4,697 4,496
Additions during the year - - 2,259 - 2,259 -
Reclassification to disposal group
liabilities held for sale - (16,760) - - - (16,760)
At 31 December 157,012 131,701 3,206 1,564 160,218 133,265
Current portion (1,411) - (3,206) (1,028) (4,617) (1,028)
Non-current portion 155,601 131,701 - 536 155,601 132,237
1 Rehabilitation provisions relate to the decommissioning costs
expected to be incurred for the operating mines. This expenditure arises at
different times over the LOM for the different mine sites and is expected to
be utilised in terms of cash outflows between years 2015 and 2050 and beyond,
varying from mine site to mine site.
2 Other provisions relate to provisions for legal and tax-related
liabilities where the outcome is not yet certain but it is expected that it
will lead to a probable outflow of economic benefits in future.
Rehabilitation obligations arise from the acquisition, development,
construction and normal operation of mining property, plant and equipment, due
to government controls and regulations that protect the environment on the
closure and reclamation of mining properties. The major parts of the carrying
amount of the obligation relate to tailings and waste rock dumps
closure/rehabilitation and surface contouring; demolition of buildings/mine
facilities; ongoing water treatment; and ongoing care and maintenance of
closed mines. The fair values of rehabilitation provisions are measured by
discounting the expected cash flows using a discount factor that reflects the
credit-adjusted risk-free rate of interest. Acacia prepares estimates of the
timing and amount of expected cash flows when an obligation is incurred and
updates expected cash flows to reflect changes in facts and circumstances. The
principal factors that can cause expected cash flows to change are: the
construction of new processing facilities; changes in the quantities of
material in reserves and a corresponding change in the LOM plan; changing ore
characteristics that impact required environmental protection measures and
related costs; changes in water quality that impact the extent of water
treatment required; and changes in laws and regulations governing the
protection of the environment.
Each year Acacia assesses cost estimates and other assumptions used in the
valuation of the rehabilitation provision at each mineral property to reflect
events, changes in circumstances and new information available. Changes in
these cost estimates and assumptions are recorded as an adjustment to the
carrying amount of the corresponding asset. Rehabilitation provisions are
adjusted to reflect the passage of time (accretion) calculated by applying the
discount factor implicit in the initial fair-value measurement to the
beginning-of-period carrying amount of the provision. Settlement gains/losses
will be recorded in other (income) expense.
Other environmental remediation costs that are not rehabilitation provisions
are expensed as incurred.
18. Commitments and Contingencies
The Group is subject to various laws and regulations which, if not observed,
could give rise to penalties. As at 31 December 2014, the Group has the
following commitments and/ or contingencies
a) Legal contingencies
As at 31 December 2014, the Group was a defendant in approximately 289
lawsuits. The plaintiffs are claiming damages and interest thereon for the
loss caused by the Group due to one or more of the following: unlawful
eviction, termination of services, wrongful termination of contracts of
service, non-payment for services, defamation, negligence by act or omission
in failing to provide a safe working environment, unpaid overtime and public
holiday compensation.
The total amounts claimed from lawsuits in which specific monetary damages are
sought amounted to US$184.7 million. The Group's Legal Counsel is defending
the Group's current position, and the outcome of the lawsuits cannot presently
be determined. However, in the opinion of the Directors and Group's Legal
Counsel, no material liabilities are expected to materialise from these
lawsuits that have not already been provided for.
Included in the total amounts claimed is an appeal by the TRA intended for a
tax assessment of US$21.3 million in respect of the acquisition of Tusker Gold
Limited. The case was awarded in favour of Acacia however the TRA has served a
notice of appeal. The calculated tax assessment is based on the sales price of
the Nyanzaga property of US$71 million multiplied by the tax rate of 30%.
Management is of the opinion that the assessment is invalid due to the fact
that the acquisition was for Tusker Gold Limited, a company incorporated in
Australia. The shareholding of the Tanzanian related entities did not change
and the Tusker Gold Limited group structure remains the same as prior to the
acquisition.
Also included in the total amounts claimed are TRA claims to the value of
US$41.3 million for withholding tax on historic offshore dividend payments
paid by Acacia Mining plc to its shareholders. In addition to the claim, there
are six other withholding tax claims which have not been quantified. These
claims are made on the basis that Acacia is resident in Tanzania for tax
purposes. Management are of the opinion that the claims do not have substance
and that it will be successfully defended.
In 2013, a number of Tanzanian claimants represented by Leigh Day initiated
proceedings against African Barrick Gold plc (now Acacia Mining plc) and its
subsidiary, North Mara Gold Mine Limited ("NMGML"), in the English Courts in
relation to injuries and fatalities at the North Mara mine. The claims were
denied by Acacia Mining and NMGML and the litigation and further claims have
been settled out of court.
NMGML and Diamond Motors Ltd (DML) have entered into arbitration over the
interpretation of drilling contracts entered into by the parties, relating to
periodic rate review and other provisions of the contracts. The claim by DML
against NMGML is quantified as US$17.2 million, together with interest and
unspecified damages. NMGML has counterclaimed against this amount and raised a
provision of US$4.2 million reflecting the view of NMGML as to the proper
interpretation and application of the rate review clauses of the Contracts.
A claim has been made for US$15 million by the contractor responsible for the
engineering, procurement and construction of a carbon in leach circuit at
Bulyanhulu Gold Mine ("BGML"). BGML has made claims in relation to delay
damages and other breaches of the contract totalling US$22 million. These
claims were referred to adjudication, with the initial decision finding in
favour of the contractor. The claims have now been referred to arbitration and
management is of the opinion that it will be successful in respect of both
claims.
b) Tax-related contingencies
The TRA has issued a number of tax assessments to the Group
relating to past taxation years from 2002 onwards. The Group believes that
these assessments are incorrect and has filed objections to each of them. The
Group is attempting to resolve these matters by means of discussions with the
TRA or through the Tanzanian Appeals process. During 2013, the Board ruled in
favour of BGML in relation to 7 of 10 issues raised by the TRA in final
assessments for 2000 - 2006 years under review. The TRA filed a notice of
intention to appeal against the ruling of the Board and Acacia filed a counter
appeal in respect of BGML to the Appeals Tribunal for all 3 items that were
lost. The Tribunal delivered its judgement in 2014 and confirmed the Board's
decision on the three items that Acacia lost. Following the Tribunals
decision, two notices of intention to appeal were filed.The positions that
were ruled against BGML were sufficiently provided for in prior year results
and management is of the opinion that open issues will not result in any
material liabilities to the Group.
c) Exploration and development agreements - Mining Licences
Pursuant to agreements with the Government of the United Republic
of Tanzania, the Group was issued special mining licences for Bulyanhulu,
Buzwagi, and North Mara mines and mining licences for building materials at
Bulyanhulu and Buzwagi Mines. The agreement requires the Group to pay to the
government of Tanzania annual rents of US$5,000 per annum per square kilometre
for as long as the Group holds the special mining licences and US$2,000 per
annum per square kilometre for so long as the Group holds the mining licences
for building materials. The total commitment for 2015 for the remaining
special mining licences and mining licences for building materials amount to
US$0.66 million (2014: US$0.65 million)..
d) Purchase commitments
At 31 December 2014, the Group had purchase obligations for
supplies and consumables of approximately US$64 million (2013: US$48 million).
e) Capital commitments
In addition to entering into various operational commitments in the
normal course of business, the Group entered into contracts for capital
expenditure of approximately US$20 million in 2014 (2013: US$6 million).
19. Post Balance Sheet Events
A final dividend of US2.8 cents per share has been proposed, which will result
in a total dividend of US4.2 cents per share for 2014. The final dividend is
to be proposed at the Annual General Meeting on 23 April 2015 and paid on 29
May 2015 to shareholders on the register on 8 May 2015. The ex-dividend date
is 7 May 2015. These financial statements do not reflect this dividend
payable.
Reserves and Resources
Mineral reserves and mineral resources estimates contained in this
report have been calculated as at 31 December 2014 in accordance with National
Instrument 43-101 as required by Canadian securities regulatory authorities,
unless otherwise stated. Canadian Institute of Mining, Metallurgy and
Petroleum (CIM) definitions were followed for mineral reserves and resources.
Calculations have been reviewed, verified (including estimation methodology,
sampling, analytical and test data) and compiled by Acacia personnel under the
supervision of Acacia Qualified Persons: Nic Schoeman, General Manager
Technical Services, Haydn Hadlow, Chief Mineral Resources Manager, and Samuel
Eshun, Technical Services Manager. However, the figures stated are estimates
and no assurances can be given that the indicated quantities of metal will be
produced. In addition, totals stated may not add up due to rounding.
Mineral reserves have been calculated using an assumed long-term
average gold price of US$1,300.00 per ounce, a silver price of US$20.00 per
ounce and a copper price of US$3.00 per pound. Reserve calculations
incorporate current and/or expected mine plans and cost levels at each
property and reflect contained ounces.
Mineral resources at Acacia mines have been calculated using an
assumed long-term average gold price of US$1,500.00 per ounce, a silver price
of US$20.00 per ounce and a copper price of US$3.00 per pound and reflect
contained ounces.
Resources have been estimated using varying cut-off grades,
depending on the type of mine or project, its maturity and ore types at each
property. Reserve estimates are dynamic and are influenced by changing
economic conditions, technical issues, environmental regulations and any other
relevant new information and therefore these can vary from year to year.
Resource estimates can also change and tend to be influenced mostly by new
information pertaining to the understanding of the deposit and secondly the
conversion to ore reserves. In addition, estimates of inferred mineral
resources may not form the basis of an economic analysis and it cannot be
assumed that all or any part of an inferred mineral resource will ever be
upgraded to a higher category. Therefore, investors are cautioned not to
assume that all or any part of an inferred mineral resource exists, that it
can be economically or legally mined, or that it will ever be upgraded to a
higher category. Likewise, investors are cautioned not to assume that all or
any part of measured or indicated mineral resources will ever be upgraded to
mineral reserves.
For mine gold reserves and resources table see www.acaciamining.com
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